Winner emerges

A maker of masks and cotton goods is the new star on ChiNext


PurCotton is Winner’s key brand

US healthcare giant Johnson & Johnson did not start out making baby oil or medical prescriptions. Its founders built the century-old enterprise on antiseptic surgical supplies. Early products such as absorbent cotton and gauze dressings were considered some of the biggest surgical care breakthroughs in the 1880s, laying the foundation for its success in maternity and baby-oriented goods that are still its hallmark today.

Johnson & Johnson’s experience seems to have offered Winner Medical its playbook too. Based in Shenzhen, it has grown from a medical supply outfit of no more than five people into a personal care product platform worth nearly Rmb54 billion ($7.9 billion).

Much of that valuation was derived from a recent flotation on ChiNext, where Winner’s shares soared 70% on debut on September 17, making it the fifth largest medical listing on the newly revamped growth board (see WiC509).

Investor enthusiasm for the company had much to do with the substantial windfall it is reaping from the Covid-19 pandemic. In the first half, sales of its surgical masks and hazmat suits jumped 29 times on the year to over Rmb2 billion, while those of its wound care products also tripled. The company’s overall revenue was up 99% to Rmb4.2 billion, helping its bottom line more than quadruple to above Rmb1 billion.

In an interview with Guangzhou Daily, CEO and founder Li Jianquan revealed that Winner’s mask making capacity – scaled up to 10 million units per day since May – was powered by 130 machines, versus just two dozen at the beginning of the year. The company’s goods are now available at 40,000 retail pharmacies across China and in more than 70 countries including Japan and the US.

However, surgical masks are no longer Winner’s main focus. Having developed the now patented cotton spunlace nonwoven fabric in 2005, Winner then shifted its focus to selling that material for usage in a wide range of personal care products such as sanitary napkins and cosmetic masks.

Initially, Winner supplied the fabric to other hygiene goods manufacturers such as Hong Kong-listed Hengan International and New York-listed Kimberly-Clarke.

In 2009, it began to retail its own consumer goods under the brand PurCotton.

With its offerings expanded to include apparel and bedding items, PurCotton is now a household name in China with 240 points of sale across the nation’s major cities. It also has 20 million members in its loyalty programme.

Last year the company generated 67% of its revenue from selling personal care products. E-commerce sales, in particular, were the biggest contributor, growing 25% on the year to Rmb1.7 billion. (About 6.5% of sales still came from supplying cotton spunlace nonwoven fabric to third parties.)

Raising Rmb3.7 billion from the initial public offering, Winner plans to spend Rmb973 million on expanding its physical store network (adding up to 96 self-operated outlets within three years) and on e-commerce infrastructure. It will also build a new surgical dressing factory in Hubei province.

It is not the first time that Winner has gone public. Back in 2005, the company was listed on the over the counter OTCBB bourse in the US, before transferring to NYSE American, an exchange for growing companies, in 2009. Poor liquidity and a subdued valuation, however, saw Winner seek a relisting in its home market. The plan was initially thwarted by a series of administrative fines levied on the company (for environmental, taxation, social security and customs reasons), as well as accounting errors.

This time around, the share-sale has turned Winner’s 63 year-old founder Li into one of China’s wealthiest men. The 66.5% stake he holds has added Rmb36 billion to his paper worth.

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