The change of coach: a 36-year “veteran” steps down, and a post-85 generation “takes the helm”!

author| Yema Finance Zhao Pu

Since the Li Jiaqi 79-yuan eyebrow pencil incident, the attention of domestic brands has generally increased. For example, Bee Flower Shampoo, Lotus MSG, Vitality 28, and Yu Meijing have all re-entered consumers ‘shopping carts.

However, the advertisement for LMidian toothpaste with good teeth once resounded throughout the streets in the 1990s, and it seemed that it failed to catch this wave of traffic. Recently, LMZ (600249.SH) Company has also seen the resignation of its veteran chairman and its second largest shareholder reduce its holdings. How can LMZ toothpaste, the number one brand in the local toothpaste industry, once hit the national market from Liuzhou, Guangxi, regain the glory of domestic products?

On the evening of February 10, LMZ announced that veteran chairman Lin Zuanhuang had submitted a written resignation report and applied to resign as chairman, director, strategy committee of the board of directors, and nomination committee of the board of directors due to retirement. After his resignation, Mr. Lin Zuanhuang no longer holds any position in the company.

Then on February 15, LMZ announced that the second largest shareholder, Liuzhou City Economic Development Investment Co., Ltd.(referred to as Liuzhou Economic Development Investment), had reduced its holdings by a total of 16.5 million shares, accounting for approximately 3% of the company’s total share capital, with a cash amount of approximately 84.3662 million yuan. At present, LMZ’s share price is 5.41 yuan/share, and the total market value is less than 3 billion yuan.

Source: Oriental Fortune Network

Lin Zuanhuang will turn 60 years old this year. He has been working for LMZ for 36 years since he started working in July 1989. During this period, he has served as president of LMZ for many years. He has devoted great energy and effort to the creation and development of the LMZ brand, industrial layout, corporate governance, standardized operation, and promotion of the company’s high-quality development.

LMZ suffered a continuous loss of net profit deducted from non-profit for 14 years from 2006 to 2019, and maintained its performance by selling CITIC Securities shares many times. When Lin Zuanhuang became chairman, it was a period when LMZ continued to lose money. However, at the end of his term as chairman, LMZ had already achieved a turnaround in performance.

After such a veteran retires, can Lianglian continue to win the battle to defend profits and regain the light of domestic products in the past?

 Lin Zuanhuang turned losses”

LMZ originated from five small private soap factories including Asian Soap Factory established in 1941. In 1978, Liuzhou City Toothpaste Factory was established. In 1994, it was restructured into a joint-stock company. In 2004, it became the first company in the industry to be listed on the Shanghai Stock Exchange.

The first LMZZ traditional Chinese medicine toothpaste was born in 1978, creating the first Chinese medicine toothpaste and selling well across the country for many consecutive years. At its most glorious time, brand advertisements such as Yidikou Good Teeth Zilianzhu Anti-inflammation, Pain Relief, Gum-protection and Hemostasis frequently appeared on TV and shops, and the hot sales scenes are still in the memories of many people born in the 1980s and 1990s.

In the more than 40 years from 1978 to the present, LMZ has had 6 main stewards. In the entrepreneurial period before listing, Wu Fulin and Wang Duowen were mainly at the helm. After listing, it has experienced four generations of chairman Liang Yingqi, Ma Zhaomei, Zhong Chunbin and Lin Zuanhuang.

Wu Fulin was the former director of Liuzhou Toothpaste Factory and was one of the first entrepreneurs after the reform and opening up. He led his team to develop the first batch of LMZ toothpaste, which was characterized by the first pure traditional Chinese medicine toothpaste in China, and quickly opened up the national market. However, he later stepped down due to being framed for accepting bribes, and finally the procuratorate found him innocent. Wang Duowen, who took over Wu Fulin, established a modern enterprise system for LMZ and created a unique marketing model and network at that time, making the streets of the country full of LMZ advertisements, bringing the company to its peak.

Lin Zuanhuang was a man who entered the era of Wang Duowen. He has successively served as the manager of the technical development department, the sales department manager, the deputy general manager, and the assistant to the general manager of Liuzhou LMZ Co., Ltd. Since June 2004, Lin Zuanhuang has served as the executive president of operations of Liuzhou LMZ Co., Ltd.

In 2004, Liang Yingqi served as chairman of LMZ. In 2005, he nominated Yue Jiang from P & G as president of the company. Yue Jiang served as vice president of P & G Beijing P & G Technology Co., Ltd., and is known as the main planner and product innovator of the Crest toothpaste brand.

After Yue Jiang arrived, Lin Zuanhuang, who had been promoted to executive president of operations, was transferred to Guangxi Yikang Pharmaceutical Co., Ltd., a subsidiary of LMZ, as chairman, but still served as a director of LMZ. In the same year, Yuan Dongsheng, former technology executive president, also left LMZ.

In 2005, when Yue Jiang was nominated by Liang Yingqi as president, LMZ lost 34.05 million yuan in net profit, the first loss since 2000. In 2006, although the profit was 151 million yuan, the net profit deducted was 108 million yuan, which was the first loss for this financial account since 2000.

Later, during the tenure of Ma Zhaomei and Zhong Chunbin as chairmen, the situation of LMZ deducting non-net profit losses remained unchanged and continued until 2019, of which the loss in 2014 reached 177 million yuan.

In 2008, Liang Yingqi and Yue Jiang left LMidian one after another. After Ma Zhaomei took over as chairman, Lin Zuanhuang returned to the president’s team and became president. There has been no change since then.

Lin Zuanhuang was both a participant and a witness from the glory of Wang Duowen’s era to the loss of money in Liang Yingqi’s era.

Fortunately, Lin Zuanhuang took over the chairmanship of LMZ in 2017 and retired in 2025, finally changing the situation of LMZ continuing to lose money after deducting non-net profits.

In 2020, the non-net profit deducted by LMZ improved from a loss of 120 million yuan in 2019 to a profit of 945,100 yuan. From 2020 to 2024, in the five years, only 2022 suffered losses due to the epidemic, and the non-net profit deducted in the remaining four years was profit. Among them, the non-net profit deducted in 2023 was approximately 14.23 million yuan, and it is expected to be approximately 8 million yuan ~ 12 million yuan in 2024.

Can the two sides rely on stock trading to ensure performance?

Accompanying the long-term loss of non-net profits of MMZ is the brand influence and market decline. The reasons for this result are both market competition and internal business structure issues.

In 2004, when LMZ was first listed, multinational companies had launched a price war in the China toothpaste market and launched a large number of low-end products. The price of toothpaste was almost equal to about 2 yuan per toothpaste. At the same time, the prices of various raw materials continued to rise, which caused many local China toothpaste companies to suffer strong impacts and severe challenges.

In addition, over the years of development, LMZ has undergone major changes in its business structure. In addition to the daily chemical industry represented by toothpaste, it has also been involved in steel trading, paper, real estate and other businesses. This is also related to shareholder investment at the beginning of its listing. For example, when it was listed in 2004, Guangxi Liuzhou Iron and Steel (Group) Co., Ltd. was its second largest shareholder.

Source: Douyin

Among the diverse businesses that LMZ is involved in, investment and financial management has become the main means of safeguarding performance.

As early as August 1999, LMZ participated in CITIC Securities as one of the sponsors, spending 152 million yuan to acquire 95 million shares, accounting for 3.83% of CITIC Securities’s total share capital. This investment will allow CITIC Securities to serve as a fire-fighting team leader for double-faced performance many times in the future.

For example, in December 2006, LMZ intensively sold 4.88 million shares of CITIC Securities in the last 10 days of the end of the year, recovering 125 million yuan in funds and achieving an investment income of 116 million yuan. That year, LMZ’s net profit was approximately 151 million yuan, but the net profit deducted was approximately 107 million yuan.

In 2007, LMZ achieved an investment income of 887 million yuan through the sale of CITIC Securities, investment funds and subscription of new shares. These investments helped LMZ’s net profit for the year to be approximately 629 million yuan, but the net profit after deducting non-profit was a loss of 130 million yuan.

Statistics show that in the 12 years from 2007 to 2018, LMZ sold shares in CITIC Securities for 10 years, selling a total of 92.0937 million shares and earning investment income of 1.985 billion yuan. Coupled with the dividend dividend of 111 million yuan during the period, as of the end of 2018, CITIC Securities has brought more than 2.2 billion yuan in real money to LMZ.

From 2006 to 2019, LMZ continued to deduct non-net profit losses for 14 years, but its attributable net profit only suffered losses for 3 years. The shares held in CITIC Securities contributed a lot. Looking through the financial reports of LMZ, it is not difficult to find that its quarterly, semi-annual and annual financial reports have repeatedly shown that the rise or fall in CITIC Securities’s share price has a significant impact on the company’s net profit.

In this regard, as early as April 2018, the Shanghai Stock Exchange inquired about LMZ, pointing out that LMZ had mainly relied on selling CITIC Securities shares to achieve profits in the past 12 years, and required both sides to evaluate their ability to continue operations.

However, until 2024, the situation that LMZ’s net profit will still be affected by CITIC Securities’s shares will be very obvious.

LMZ’s performance forecast shows that the net profit attributable in 2024 is expected to be 75 million yuan to 90 million yuan, a year-on-year increase of 228.85% to 294.62%. ldquo; Yema Financial combed and found that this is the highest net profit attributable to LMZ since 2007.

However, its profits mainly rely on the contribution of stocks. The change in the fair value of its trading financial assets (mainly CITIC Securities shares held by LMZ) is approximately 87 million yuan, accounting for more than 96% of net profit. After deducting non-operating profits and losses, LMZ’s net profit after deducting non-operating profits in 2024 is expected to be 8 million yuan to 12 million yuan, a year-on-year decrease of 15.68% to 43.79%.

Well-known economist Song Qinghui pointed out that this shows that the profitability of LMZ’s main business is still seriously insufficient. We should focus on improving the company’s market competitiveness and avoid the profit-making model of stock trading.

A senior manager who was in charge of the production and technical departments at the peak of LMZ lamented that from the perspective of product management, if LMZ’s market competitiveness is not improved, it may face the risk of being left out by the market.

“Old brand renovation, how does newcomer Zhou Yunxiang break through the circle”

After receiving the attention of the Shanghai Stock Exchange, LMZ said that after the company changed its person in charge in November 2017, it clearly defined its business policy of focusing on its main business and giving priority to benefits, returned to its main business of traditional Chinese medicine nursing daily chemical products, and integrated the pharmaceutical industry and daily chemical industry. 2017 was the year when Lin Zuanhuang took over as chairman.

By December 2019, LMZ completed the sale of major assets and divested its non-main business paper sector (original paper products and paper companies) and real estate sector (original housing development companies). The current main business is the daily chemical industry and Pharmaceutical industry.

After returning to his main business, LMZ also got better.

“Yemma Finance noticed that in recent years, LMZ has been trying to increase brand promotion of new brand products, open up sales channels, and revenue has increased. At present, LMZ has deployed online e-commerce platforms such as Tmall, Jingdong, Douyin, and Pinduo, and sells them through live broadcasts and other means.

However, the data on LMZ’s online platform is still relatively flat. For example, it has been more than five years since the official flagship store of LMZ Douyin released its first work in October 2019, but it has only 88,000 fans and sales of 583,000 pieces.

Source: Douyin

In contrast, Bee Flower, which is also a national brand, has exploded since the 79-yuan eyebrow pencil incident last year. The latest data shows that Bee Flower’s Douyin official flagship store has 5.151 million fans, with sales reaching 10.213 million yuan.

While trying online channels, LMZ is also launching new brands, such as Mulanze, Xiaoyao, Fangcao and other new products covering oral care, personal care and hotel daily necessities. The packaging strives to highlight national cultural characteristics, mainly by LMZ, Jiangsu Industrial Company and Fangcao Company are responsible for the operation.

LMZ introduced that its subsidiary Jiangsu Industrial Company has the largest tourism toothpaste production base, and its brand has a great influence in the field of budget hotels.

Although there is no authoritative data, LMZ believes from multiple analyses that Jiangsu Industrial Company has a stable market share and has occupied a leading position in the hotel disposable products segment. At present, Jiangsu Industrial Company has opened up large-scale supermarket and chain hotel customers such as RT-Mart, Ginza, Nancheng Department Store, and Yaduo Hotels, and has formed direct supply (direct supply) cooperation with these customers.

Photo source: Jingdong

It should be pointed out that LMZ’s R & D expenses in the first three quarters of 2024 were only 11.0173 million yuan, accounting for only 1.39% of current revenue, a slight increase of 0.16% year-on-year, significantly lower than the industry average of 3%(according to Ai Media Consulting data), new successors may need to pay attention to this issue.

After Lin Zuanhuang, LMZ welcomed Zhou Yunxiang, a new director born in the 1985 era. He is currently the party secretary and chairman of Guangxi Liuzhou City Industrial Investment Development Group Co., Ltd.(referred to as Liuzhou City Industrial Investment Company), and Liuzhou City Industrial Investment Company is the largest shareholder of LMZ. In addition, Zhou Yunxiang also serves as Vice Chairman of Dongfeng Liuzhou Automobile Co., Ltd. and Secretary of the Party Committee of Liuzhou LMZ Co., Ltd.

At the same time, LMZ also hired Xiong Jianfeng as vice president. According to public information, Xiong Jianfeng is also from the largest shareholder, Liuzhou City Industry and Investment Company. He served as the director of the investment and development department and the general manager of the strategic investment and financing department of Liuzhou City Industry and Investment Company.

Song Qinghui analyzed that although the toothpaste business is the traditional strength of LMZ, it has been squeezed by domestic and foreign brands such as Colgate, Crest, Yunnan Baiyao, and Pien Tze Huang. If LMZ wants to break through, it should give full play to the traditional advantages of traditional Chinese medicine in protecting gums to form technical barriers. At the same time, it should use platforms such as Douyin and Xiaohongshu to accurately release and design Short Video advertisements, invite KOL/KOC to conduct experiential promotion and enhance brand exposure.

Now, with Lin Zuanhuang retiring, Zhou Yunxiang at the helm, and Xiong Jianfeng entering the team, how can LMZ turn the tables against the wind? Worth looking forward to!