[Biz Leader] Zhu Zhongbiao, CEO of Coloray: "Global Bases and Investment in Chinese Online Platforms"

Zhou Zhongbiao, CEO of Colray.

[Asia Economy Reporter Jang Hyowon] “We plan to expand trade by securing global bases in the United States, Europe, and invest in Chinese online platforms to broaden the distribution business base.”

Zhu Zhongbiao, CEO of Coloray, a Chinese company specializing in pearl luster pigments for cosmetics, explained the purpose of the paid-in capital increase in an interview with on the 4th.

Coloray conducted a third-party allotment paid-in capital increase worth 12 billion KRW on the 1st. The new share issuance price was 1,200 KRW per share, which is more than 16% premium over the reference stock price. This is interpreted as investors expecting a rise in Coloray’s stock price in the future. The capital increase targets are Chinese investment companies GIANT NEXUS LIMITED and DE Investment Holdings Limited.

Coloray announced that the purpose of this paid-in capital increase is to secure funds for investment in other companies and operating capital. CEO Zhu stated, “It is to expand the pearl luster pigment business and distribution platform to enhance synergy between the two sectors,” adding, “We plan to invest in the United States, Italy, India, and Korea to expand global trade.”

The pearl luster pigment business, Coloray’s core investment sector, has a high profit margin, with an operating profit margin approaching 50%. They have vertically integrated by securing subsidiaries that produce raw materials independently and can utilize China’s low labor costs, resulting in relatively low cost burdens. Additionally, rapid new product launches are considered a key competitive advantage that boosts profit margins.

CEO Zhu said, “Margins for widely supplied products like silver pearl are only about 10%, but new products reach 60-70%,” and added, “Coloray focuses on the cosmetic pearl market, where other pearl producers do not make large investments, and quickly launches new products to increase profit margins.”

Coloray also plans to invest in expanding Chinese online platforms with the funds from this capital increase. Since 2020, Coloray has been operating an online distribution business to diversify sales. This business procures luxury goods from Korean duty-free shops and sells them on Chinese online shopping malls such as Tmall. Tmall is a global premium product sales platform operated by Alibaba in China. Last year, distribution sales declined due to the COVID-19 situation.

CEO Zhu explained, “When consumption decreased in China last year due to COVID-19, the Chinese government expanded the duty-free shopping tourism zone in Hainan to encourage consumption of imported goods within Hainan instead of overseas,” and added, “Now that the COVID situation is easing, online sales are expected to activate, so we will proactively attract new platforms such as JD.com and Pinduoduo, as well as Tmall.”

Coloray holds a large amount of cash for the distribution business. As of the end of the first quarter this year, cash equivalents were about 148 billion KRW. Large liquidity is essential in a structure where products such as luxury goods are purchased and distributed through platforms.

He explained, “The distribution business requires economies of scale and sufficient liquidity to continue expanding,” and said, “In 2020, Coloray recorded about 28 billion KRW in sales from the distribution business alone, and to build this scale, about 130 billion KRW in cash liquidity is needed.” He added, “This paid-in capital increase will be a stepping stone for growth and an opportunity to see the fruits of the businesses we have been pursuing.”