Popular toothpaste company's parent company rushes to Hong Kong stocks: marketing-driven high growth, profit turned to loss last year

Ask AI · High gross profit margin but low net profit, can this semi-viral marketing-driven model be sustained?

New consumer brands are accelerating their layout into the capital markets. Recently, Shenzhen Xiaokuo Technology Co., Ltd. (hereinafter referred to as “Xiaokuo Technology”) submitted an IPO prospectus to the Hong Kong Stock Exchange, aiming to become the “Number One Oral Care Stock” on the HKEX. The company is the parent of the popular oral care brand “Semi.”

For the capital market, the story of this company lies in: a high school dropout entrepreneur who worked on an assembly line, twice brought the company back from the brink when cash flow was nearly exhausted, and ultimately pushed this young brand to the doorstep of the Hong Kong Stock Exchange. Over the past three years, the company’s performance has exploded: revenue from 2023 to 2025 is projected to be 1.1B yuan, 2.5B yuan, and 2.5B yuan respectively, with an 82.5% year-over-year growth rate in 2025.

However, behind this rapid growth, Semi also faces unavoidable practical challenges. The IPO prospectus shows that the company recorded an annual loss of about 18.25 million yuan in 2025, mainly affected by non-operational factors such as equity incentives and redemption liabilities, reflecting a high dependence on capital operations.

In addition, Xiaokuo Technology has maintained a high gross profit margin of about 70% for a long time, but sales and marketing expenses continue to rise, accounting for over 70% of gross profit in 2025. Meanwhile, net profit margin is only about 6%, showing a characteristic of “high gross profit, low net profit.” This indicates that the company’s high revenue growth heavily relies on brand investment and traffic-driven strategies, and its actual profitability falls short of expectations.

Performance surged by 82.5%, driven by “category expansion + channel development”

Like most new consumer brands that started online, Xiaokuo Technology has experienced rapid performance growth over the past three years, with revenues of 1.1B yuan, 1.37B yuan, and 2.32B yuan in 2023, 2024, and 2025 respectively, with year-over-year growth rates of 24.9% and 82.5%, representing explosive growth.

The IPO prospectus mentions that their rapid growth stems from dual drivers: strategic product category expansion and channel development. First, regarding category expansion, Xiaokuo Technology’s three main business segments are basic oral care, professional and cosmetic oral care, and other personal care. Among these, basic oral care accounted for 92.9% of total revenue in 2025, meaning most of the revenue is contributed by this segment. Products in basic oral care mainly include toothpaste and toothbrushes, with revenue reaching 155M yuan in 2025, up 83.58% year-over-year. Taking toothpaste as an example, Semi’s toothpaste functions are highly detailed, with categories including whitening, freshening, repair, anti-sensitivity, and anti-cavity. The prospectus lists as many as 10 representative toothpaste products. Xiaokuo Technology currently has two main brands: Semi and Little Arrow. As the core brand, the prospectus shows that Semi has over 500 SKUs, with prices ranging from 6.9 yuan to 49.9 yuan.

Next, regarding channel development, Xiaokuo Technology’s online channel proportions in 2023, 2024, and 2025 are 94.5%, 88.1%, and 80.3%. Although the online channel share has decreased, it is clear that the company still primarily relies on online channels. Offline channels’ share has increased year by year, from 5.5% in 2023 to 19.7% in 2025. Notably, offline channels significantly boost overall sales. The IPO prospectus shows that by December 31, 2025, its offline retail coverage reached nearly 100% of all prefecture-level cities in mainland China, expanding to towns, villages, and hamlets, with products available at over 110,000 offline retail points.

In recent years, the “hit product” strategy favored by domestic new consumer brands is also evident in Xiaokuo Technology’s IPO documents. The prospectus shows that Semi’s portable mouthwash has sold nearly 300 million units as of the latest feasible date.

It is reported that in 2020, Semi launched the Loho series mouthwash, which quickly became a bestseller due to its non-spicy, fruit-flavored formula, making a mark in the oral care track. The mouthwash is a true viral product that has built brand recognition among consumers. According to data from Frost & Sullivan, in retail sales, they hold an 8.0% share of oral care products and 9.2% of toothpaste, ranking first in both categories. The revenue from mouthwash in professional and cosmetic oral care shows a V-shaped rebound: 144 million yuan in 2023, down to 104 million yuan in 2024, then rising again to 169 million yuan in 2025. It is reasonable to infer that channel expansion and increased brand visibility have contributed to the growth of this segment.

“High gross profit, low net profit,” high marketing expenses eroding profitability

While revenue continues to grow, profits turned into losses suddenly in 2025. The IPO prospectus shows that the company’s annual loss in 2025 was about 18.25 million yuan, but adjusted net profit was 1.55 billion yuan. This indicates that a large part of the loss was technical, including expenses related to equity settlement and share-based payments, which are one-time costs associated with pre-IPO equity incentives. Redemption liabilities reached 56.9 million yuan in 2025, often representing commitments made during earlier financing rounds for investor recoverable shares, recorded as “payables.” Other factors include income tax impacts. Although these non-operational losses pose some risk, they also reflect the company’s reliance on capital operations and high incentive costs. According to Tianyancha, the main brand Semi has undergone nine rounds of financing, with different lead investors each time, indicating a relatively complex financing structure.

Xiaokuo Technology’s gross profit margin is very high within the daily chemical sector, at 72.1%, 69.8%, and 71.9% from 2023 to 2025. However, the margin is not entirely stable. Like most emerging domestic new consumer brands, Xiaokuo Technology also faces the challenge of high marketing expenses. Sales and distribution costs have risen year by year, from 570 million yuan in 2023 to 720 million yuan in 2024, and 1.37 billion yuan in 2025. The proportion of marketing expenses in this category has increased from 83.2% in 2023 to nearly 90%. Notably, the gross profit in 2023, 2024, and 2025 was 790 million yuan, 960 million yuan, and 1.8 billion yuan respectively. Comparing these figures, marketing expenses almost eroded most of the gross profit, accounting for 76% of gross profit in 2025.

According to Nandu reporters, Xiaokuo Technology also partnered with Hua Chenyu this year to co-found a daily chemical home brand called “Key,” with Hua Chenyu serving as co-founder. This indicates a deep integration of brand and celebrity IP. The products launched include floral water, hand cream, lip balm, essential oil patches, etc., priced relatively affordably.

The IPO prospectus shows that the net profit margin under non-IFRS measures was 4.9%, 4.8%, and 6.2% from 2023 to 2025. Comparing this with the roughly 70% gross profit margin mentioned earlier, Xiaokuo Technology exhibits a typical “high gross profit, low net profit” performance. Simply put, the company’s products have high brand premiums that support high gross margins, but more money is needed to sell the products, further indicating that the company’s growth is largely driven by traffic. For new consumer brands, net profit margin better reflects the company’s true profitability under market testing.

Written by: Nandu Video Reporter Xu Bingqian