ZHONGHENG GROUP(SH:600252) Jin Rong Jie·2025-04-25 03:14Core Viewpoint - The decline of Tianqi toothpaste, once a leading brand in the Chinese market, is attributed to quality issues and management challenges following its acquisition by Zhongheng Group, highlighting the difficulties traditional brands face in maintaining quality and relevance in a competitive market [5][10]. Group 1: Brand History and Market Position - Tianqi toothpaste, launched in 1974, became popular due to its unique formulation using traditional Chinese medicine, achieving a market share of 15% at its peak [5]. - In 2004, Tianqi toothpaste's sales reached 400 million units, generating revenue of 1 billion yuan, positioning it among the top four toothpaste brands in China [2]. Group 2: Quality Issues - In April 2025, the National Medical Products Administration reported that two variants of Tianqi toothpaste had bacterial counts exceeding standards by 1280 times and 38 times, respectively [6]. - The "Panic of Fire" variant contained 19,000 CFU per gram, far exceeding the national limit of 15 CFU/g, contrasting sharply with its previous reputation for quality [6]. Group 3: Corporate Changes and Challenges - After a series of ownership changes, Zhongheng Group acquired Tianqi's parent company in 2021, aiming to revitalize the brand through a dual focus on pharmaceuticals and daily chemicals [6]. - Despite efforts to expand the product line, including mouthwash and laundry detergent, the market share of core products has not recovered, with the daily chemical segment contributing less than 20% to total revenue [7]. Group 4: Financial Performance - In 2024, Zhongheng Group reported revenue of 2.27 billion yuan, a decline of 26.7%, and a net loss of 377 million yuan, marking a significant downturn from profitability [8]. - The pharmaceutical segment faced challenges, with a 40% price drop in its flagship product, leading to an 8 percentage point decrease in gross margin [8]. Group 5: Future Outlook and Strategic Questions - Zhongheng Group holds 4.1 billion yuan in cash and has a debt ratio of 31.55%, but faces significant challenges in transforming its business model [9]. - The company must address quality trust issues and appeal to younger consumers while navigating the pressures of price reductions in the pharmaceutical sector [9][10]. - Key questions remain regarding how to restore brand health, manage product recalls, and implement modern production standards in the daily chemical sector [10].