Investment Rating - The report maintains a "Buy" rating for Giant Biogene and Shanghai Jahwa, reflecting their potential for growth and turnaround [11][26]. Core Insights - The China beauty sector is showing signs of stabilization, with demand shifting from negative year-over-year (yoy) growth to a flat performance, particularly noted during Women's Day [1]. - Onshore sales growth in 1Q25 re-accelerated to 3.2% yoy, surpassing the full-year estimate of 1.2% yoy, although this was countered by a decline in the DFS channel [1]. - The sector has experienced a 50% rerating, with the 12-month price-to-earnings (PE) ratio moving from 20x to 30x, indicating a recovery towards mid-cycle valuation levels [1][7]. Summary by Sections Sales Performance - The covered companies in the China cosmetics sector reported mixed results for 2024/1Q25, with most missing sales expectations except for Giant Biogene, which outperformed due to effective cost management [2][25]. - The average selling expenses ratio decreased by 6.8 percentage points yoy in 4Q24 and 3.7 percentage points yoy in 1Q25, indicating improved cost discipline across the sector [2][25]. Competitive Landscape - Local brands are gaining market share, with emerging leaders like Giant Biogene, Marubi, and Chicmax achieving over 30% sales growth, while global brands are pulling back on promotions to focus on quality growth [3][13]. - The premium segment remains largely dominated by global brands, but local brands are expected to capture more market share over the next 5-10 years [6]. Valuation Trends - The beauty sector's valuation has rebounded to around 30x PE, reflecting a recovery from downcycle lows and aligning more closely with global peers [7][8]. - Limited valuation upside is anticipated as the sector stabilizes at mid-cycle levels, with potential idiosyncratic rerating drivers emerging from new product categories and brand expansions [8]. Catalysts for Growth - Key upcoming events include the 618 shopping festival and increased activity in the medical aesthetics space, which could provide growth opportunities for companies like Giant Biogene [9][10]. - The report highlights the importance of effective execution and brand expansion as critical factors for sustained growth in the sector [8][11]. Stock Preferences - The report favors emerging leaders such as Giant Biogene and Shanghai Jahwa, while maintaining a neutral stance on MGP, Proya, and Botanee due to concerns over growth visibility and execution [11][26]. - A sell rating is assigned to Bloomage, reflecting challenges in revitalizing its cosmetics business amid intensified competition [11][26].

Core Points - The Shanghai Composite Index decreased by 0.30%, while the China Securities Hong Kong Mid-Cap Select Index increased by 0.38%, closing at 2305.91 points with a trading volume of 16.681 billion yuan [1] - The China Securities Hong Kong Mid-Cap Select Index has seen a rise of 10.27% over the past month, 5.76% over the past three months, and 7.80% year-to-date [1] - The index consists of 100 medium-sized securities selected from the Hong Kong market, reflecting the overall performance of medium-sized securities listed on the Hong Kong Stock Exchange [1] Index Holdings - The top ten weighted stocks in the China Securities Hong Kong Mid-Cap Select Index are: Pop Mart (6.77%), China Telecom (3.42%), CITIC Bank (2.87%), China Pacific Insurance (2.72%), CanSino Biologics (2.66%), China Tower (2.37%), Kingdee International (2.09%), Genscript Biotech (1.82%), CITIC Securities (1.79%), and Bilibili-W (1.76%) [1] - The index's holdings are entirely composed of stocks listed on the Hong Kong Stock Exchange, with a 100% allocation [1] Industry Breakdown - The industry composition of the index sample includes: Consumer Discretionary (19.26%), Industrials (12.52%), Financials (11.84%), Information Technology (9.83%), Communication Services (9.25%), Healthcare (8.72%), Consumer Staples (7.59%), Utilities (7.41%), Materials (5.29%), Real Estate (5.04%), and Energy (3.25%) [2] - The index sample is adjusted semi-annually, with adjustments occurring on the next trading day after the second Friday of June and December [2] - A buffer zone is established for sample adjustments, prioritizing the retention of older samples ranked between 81 and 220, with specific procedures for handling delistings, mergers, and other corporate actions [2]

Financial Performance - Revenue for 2024 reached RMB 5,538.8 million, a 57.2% increase from RMB 3,524.1 million in 2023[6] - Gross profit for 2024 was RMB 4,546.9 million, reflecting a 54.3% growth compared to RMB 2,947.1 million in 2023[6] - Net profit attributable to shareholders for 2024 was RMB 2,062.3 million, up 42.1% from RMB 1,451.8 million in 2023[6] - The company achieved a total revenue of RMB 55.39 billion, representing a year-on-year growth of 57.2%[11] - Adjusted net profit reached RMB 21.52 billion, with a year-on-year increase of 46.5%[11] - Total revenue for the year ended December 31, 2024, reached RMB 5,538.8 million, a 57.2% increase from RMB 3,524.1 million for the year ended December 31, 2023[31] - Direct sales revenue grew over 70% year-on-year in 2024, becoming a major driver of business growth[10] - Direct sales and distribution channels generated revenues of RMB 4,134.2 million and RMB 1,404.6 million, accounting for 74.6% and 25.4% of total revenue, respectively[26] - Professional skin care products accounted for 77.7% of total revenue in 2024, with RMB 4,302.3 million in sales, up from 75.1% and RMB 2,647.3 million in 2023[32] - Total sales cost for 2024 was RMB 991.9 million, a 71.9% increase from 2023, primarily due to increased sales volume and material costs[43] - Gross profit for 2024 was RMB 4,546.9 million, a 54.3% increase from 2023, with a gross margin of 82.1%, down from 83.6% in 2023[44] Research and Development - Research and development investment increased by 42% in 2024, with 74 new patents and applications filed[9] - Research and development expenditure amounted to RMB 106.5 million, a 42.1% increase year-on-year, accounting for 1.9% of total revenue[13] - The company has 188 ongoing research projects and holds 167 patents, with 74 new patents granted during the reporting period[13] - The company plans to increase R&D investment and prepare for the commercialization of three categories of medical devices by 2025[30] Market Expansion and Product Development - The company established a multi-brand development matrix, launching innovative products that gained consumer favor[10] - The company is actively expanding its international market presence, aiming to bring its products to global consumers[11] - The company is focusing on the development of innovative and competitive products to meet diverse consumer needs[11] - The "可復美" brand has developed a comprehensive product matrix, including a major medical device series and four skincare series, enhancing its market presence[16] - The company launched the new "Kefumei Focus Series" targeting skin conditions such as dullness and acute fatigue, with the "Kefumei Focus Cream" achieving top rankings in sales during the 2024 Double Eleven shopping festival[19] - The company expanded its product offerings with the "Kefumei Order Series" and "Kefumei Ton Ton Series," addressing various consumer needs and enhancing brand reach[20] Sales and Distribution Channels - Online channel GMV growth during the 2024 618 promotion exceeded 60% for Kefu Mei and 100% for Keli Jin, and during the 2024 Double Eleven promotion, growth exceeded 80% and 150%, respectively[25] - Direct sales through DTC online stores generated revenue of RMB 3,587.2 million, a 66.5% increase from 2023, accounting for 64.8% of total revenue in 2024[34] - Revenue from online direct sales on e-commerce platforms reached RMB 377.1 million, up 112.5% year-over-year, representing 6.8% of total revenue in 2024[35] - Offline direct sales revenue was RMB 169.9 million, a 92.0% increase from 2023, making up 3.0% of total revenue in 2024[36] - Sales to distributors amounted to RMB 1,404.6 million, reflecting a 27.3% increase year-over-year, contributing 25.4% to total revenue in 2024[37] Corporate Governance and Management - The company has adopted the corporate governance code as per the Listing Rules Appendix C1 and has complied with all applicable code provisions during the reporting period, except for deviation from code provision C.2.1[150] - The board of directors consists of 4 executive directors and 3 independent non-executive directors, ensuring compliance with the requirement of having at least one independent non-executive director with appropriate professional qualifications or accounting expertise[151] - The company has established four board committees, including the audit committee, nomination committee, remuneration committee, and corporate governance committee[165] - The company has implemented a training program for directors and senior management regarding compliance with Chinese laws and regulations, with a specific training session held in July 2024[188] - The company has established an ESG governance committee to regularly report on ESG-related matters to the board[66] Employee and Shareholder Engagement - The company employed 1,758 full-time staff, with 37.0% in production, 10.6% in R&D, 32.2% in sales and marketing, and 20.2% in general and administrative roles[105] - The company emphasizes effective communication with shareholders through financial reports, annual general meetings, and timely disclosures on its website[196] - The company encourages shareholder participation in meetings and ensures proper notice is given at least 21 days before annual meetings[197] - The company provides communications in both English and Chinese to facilitate shareholder understanding[198] - The company has a dedicated website (www.xajuzi.com) for regular updates and communication with shareholders and investors[199] Social Responsibility and Community Engagement - The company engaged in social responsibility initiatives, donating products valued at over RMB 14 million during various charitable activities[28] - The "Kefumei" brand introduced a bottle recycling program and engaged in various community outreach activities to promote scientific skincare[23] Risk Management - The company faces various operational risks, including changes in the regulatory environment in China, the ability to provide quality products, and competition from other market participants[185] - The company has implemented a risk management and internal control system to address identified risks, which includes policies and procedures deemed suitable for its operations[185] - Financial risks faced by the company include foreign exchange risk, credit risk, and liquidity risk, with the main financial instruments being cash and cash equivalents[187] - The company conducts annual risk factor identification and assessment, reviewing the effectiveness of risk assessment and control measures[186] Dividends and Shareholder Returns - The board proposed a final dividend of RMB 0.6021 per share and a special dividend of RMB 0.5921 per share[6] - The company's undistributed profits available for distribution to shareholders amounted to RMB 4,057 million as of the reporting period end[75]

Core Viewpoint - The controversy surrounding the skincare brand Kefu Mei, owned by Giant Bio (02367.HK), involves allegations of containing the banned ingredient EGF (Epidermal Growth Factor), leading to consumer complaints and regulatory scrutiny [2][3][6]. Company Overview - Giant Bio was established in 2000 and went public on the Hong Kong Stock Exchange in 2022. The company owns multiple brands, including Kefu Mei, Keli Jin, and Xin Gan [6]. - In 2024, the company reported a revenue increase of 57.2% to 5.539 billion yuan, with a net profit growth of 42.1% to 2.062 billion yuan. The gross margin decreased from 83.6% in 2023 to 82.1% [6]. Regulatory Actions - The Shaanxi Provincial Drug Administration conducted inspections in March and April 2024 and found no evidence of EGF being added during the production process, leading to a decision not to file a case [2][3]. - A follow-up inspection in April 2025 also did not reveal any violations regarding the addition of EGF. The agency employed liquid chromatography-mass spectrometry (LC-MS) for testing multiple batches of the product, which also did not detect EGF [3]. Product Safety and Compliance - The National Medical Products Administration stated in 2019 that EGF cannot be used as a cosmetic ingredient, and any product claiming to contain EGF is considered illegal. EGF is primarily used in medical fields for treating burns and wounds [6]. - The controversy began when a consumer reported adverse effects after using Kefu Mei's "Recombinant Collagen Repair Dressing (G-type)" and later found EGF in the product through independent testing [2].

Core Insights - On April 17, 2023, Juzibio made its debut on the Hong Kong Stock Connect active trading list for the first time in a month [2][3] - The total trading volume of active stocks on the Hong Kong Stock Connect reached HKD 382.32 billion, accounting for 42.41% of the day's total trading volume, with a net buying amount of HKD 5.99 billion [2] - Alibaba-W led the trading volume with HKD 65.85 billion, followed by Tencent Holdings and Xiaomi Group-W with HKD 59.17 billion and HKD 57.81 billion, respectively [2] Trading Activity Summary - The active stocks on April 17 included: - Tencent Holdings: Trading volume of HKD 59.17 billion, net buying of HKD 7.82 billion, and a closing price of HKD 458.00 with a daily increase of 2.23% [2] - Alibaba-W: Trading volume of HKD 65.85 billion, net buying of HKD 8.35 billion, and a closing price of HKD 108.70 with a daily increase of 3.13% [2] - Xiaomi Group-W: Trading volume of HKD 57.81 billion, net selling of HKD 13.43 billion, and a closing price of HKD 41.95 with a daily increase of 1.70% [2] - Juzibio: Trading volume of HKD 6.35 billion, net buying of HKD 4.16 billion, and a closing price of HKD 72.10 with a daily decrease of 2.10% [3] Recent Performance - Over the past month, Alibaba-W, Tencent Holdings, and Xiaomi Group-W have been the most frequently listed stocks on the active trading list, each appearing 22 times [2] - Juzibio's recent trading activity indicates a growing interest, as it was the only stock to debut on the active list on April 17 [2][3]

Group 1 - The company plans to raise approximately HKD 23.33 billion by placing 35 million existing shares at a price of HKD 66.65 per share, with a net amount of about HKD 22.94 billion expected after expenses [1] - The placement price represents a discount of 9.5% to the closing price prior to the announcement and a 6.78% discount to the average price over the past five days [1] - This is the second equity financing since the company's IPO, with total fundraising now nearing HKD 40 billion, significantly higher than the initial IPO amount of HKD 5.49 billion [1] Group 2 - In 2024, the company achieved revenue of approximately HKD 55.39 billion, a year-on-year increase of about 57%, and a net profit of approximately HKD 20.62 billion, up 42% year-on-year [2] - The gross profit margin stands at 82.1%, with the main product line, 可复美, generating sales of HKD 45.42 billion, a 62.9% increase, and accounting for 82.0% of total revenue [2] - The company faces challenges such as low R&D investment, which was only HKD 1.06 billion (1.9% of revenue) in 2024, compared to competitors with significantly higher R&D expense ratios [2]

Core Viewpoint - The company, Juzi Bio (02367.HK), has entered into a placement and subscription agreement to sell and issue shares at a price of HKD 66.65 per share, aiming to raise approximately HKD 23.33 billion for business development and general corporate purposes [1][2]. Group 1 - The seller has agreed to sell 35 million shares, which represents about 3.38% of the company's issued shares as of the announcement date [1]. - The total expected net proceeds from the placement and subscription are approximately HKD 22.94 billion, which will be used for core business development, marketing, and R&D investments [1]. - The placement is expected to enhance the company's financial strength, market competitiveness, and overall capabilities, promoting long-term sustainable development [2]. Group 2 - The placement will attract high-quality institutional investors, enriching the company's shareholder base and improving share liquidity [2]. - The subscription shares will be issued under general authorization, ensuring compliance with regulatory requirements [2].

Group 1 - The company, Giant Bio (02367), announced a placement and subscription agreement on April 16, 2025, where the seller agreed to sell 35 million shares at a price of HKD 66.65 per share [1] - The placement price of HKD 66.65 represents a discount of approximately 9.50% compared to the closing price of HKD 73.65 on April 16, 2025 [1] - The total amount expected from the placement and subscription is approximately HKD 2.333 billion, with a net amount of about HKD 2.294 billion after deducting commissions and estimated expenses [1] Group 2 - The net proceeds from the placement and subscription are intended for core business development and ecosystem layout, including brand promotion, marketing, category expansion, overseas business, R&D investment, and general corporate purposes [1] - The announcement states that the fundraising will enhance the company's financial strength, market competitiveness, and overall capabilities, promoting long-term healthy and sustainable development [1] - The placement is expected to attract high-quality institutional investors, enriching the company's shareholder base and improving share liquidity [1] Group 3 - The seller is a limited liability company registered under the laws of the British Virgin Islands, holding approximately 56.10% of the company's existing issued share capital [2] - The seller acts as a holding vehicle for the FY Family Trust, with the spouse of executive director Yan Jianya serving as the trustee and beneficiary [2]

Summary of the Conference Call Company and Industry - The conference call pertains to a biotechnology company specializing in skincare and medical devices, particularly focusing on recombinant collagen products and their applications in dermatology and aesthetic medicine. Key Points and Arguments 1. **Brand Development and Industry Engagement** The company emphasizes the importance of building its brand image and academic leadership in the recombinant protein field, participating in various medical and aesthetic conferences to enhance its industry presence [1][2]. 2. **Long-term Brand Value** The company is committed to enhancing the long-term value of its brand by engaging with younger demographics through initiatives like university campus events and health awareness campaigns [2]. 3. **Omni-channel Strategy** The company is expanding its product coverage through a combination of online and offline channels, including medical institutions and retail pharmacies, to establish a professional brand image [3]. 4. **E-commerce and Social Media Sales** The company utilizes platforms like Tmall, Douyin, and JD.com for sales and marketing, tailoring strategies to each platform's characteristics to maximize marketing potential [4][5]. 5. **Production Capacity Expansion** The company has significantly increased its production capacity by adding new production lines for recombinant collagen and cosmetics, indicating a robust growth strategy [6]. 6. **Social Responsibility Initiatives** The company engages in various charitable activities, including donations and environmental initiatives, reflecting its commitment to social responsibility [6][7]. 7. **Product Development and Innovation** The company is focused on continuous product innovation, with plans to launch new products, including the upgraded version of its collagen stick, which has shown significant sales growth [10][11]. 8. **Market Expansion Plans** The company aims to expand its market presence internationally, particularly in Southeast Asia, leveraging its technological and marketing capabilities to penetrate new markets [33][34]. 9. **Consumer Insights and R&D** The company employs consumer insights to drive its R&D efforts, ensuring that product development aligns with market needs and consumer preferences [28][29]. 10. **Acquisition Strategy** The company is exploring acquisition opportunities in skincare, medical materials, and cutting-edge technology sectors to enhance its product offerings and market reach [42][43]. 11. **Offline Retail Strategy** The company plans to expand its offline presence by opening flagship stores in key cities, focusing on brand experience and consumer education [48][49]. Other Important but Possibly Overlooked Content - The company has a strong focus on scientific research and product efficacy, with a commitment to continuous improvement based on consumer feedback and clinical validation [12][16]. - The company recognizes the growing demand for high-quality skincare products and aims to capture a larger market share by addressing deeper skin issues with its product offerings [15][41]. - The company is also exploring the potential of new ingredients and technologies, such as recombinant proteins, to differentiate its products in a competitive market [44][46].

Investment Rating - The investment rating for the company is "Buy" and is maintained [7] Core Viewpoints - The company reported a revenue of 5.54 billion, representing a year-on-year growth of 57%, and a net profit of 2.06 billion, with a year-on-year increase of 42%. The adjusted net profit reached 2.15 billion, reflecting a growth of 46.5% [2][4] - The board proposed a final dividend of 0.60 per share and a special dividend of 0.59 per share [2][4] - The main brand, "可复美" (Kefumei), continued to show high growth, while the sub-brand "可丽金" (Kelin) optimized its structure [8] Revenue and Profit Analysis - In 2024, the main brand "可复美" achieved a revenue of 4.54 billion, growing by 63%, while "可丽金" generated 0.84 billion, with a growth of 36% [8] - The company’s gross profit margin decreased by 1.5 percentage points due to the expansion of product categories, while the net profit margin was at 37.2%, still high within the industry [8] - In the second half of 2024, the company achieved a revenue of 3 billion, with a year-on-year growth of 56% [8] Product and Market Development - The company is actively expanding its research in the field of recombinant collagen and has made progress in medical device certifications [8] - The company received exclusive patent authorization for various types of recombinant collagen, enhancing its patent portfolio [8] Future Profit Projections - The adjusted net profit for 2025-2027 is projected to be 2.59 billion, 3.11 billion, and 3.74 billion respectively, with corresponding valuations of 25, 21, and 17 times [8]