Market Overview - The Shanghai Composite Index rose by 0.22% on September 22, with 11 sectors experiencing gains, led by the electronics and computer sectors, which increased by 3.71% and 1.70% respectively [1] - The total net outflow of capital from the two markets was 18.892 billion yuan, with only four sectors seeing net inflows [1] Sector Performance - The electronics sector had the highest net inflow of capital, amounting to 9.357 billion yuan, coinciding with its 3.71% increase [1] - The computer sector followed with a net inflow of 2.081 billion yuan and a daily increase of 1.70% [1] - The power equipment sector experienced the largest net outflow, totaling 4.662 billion yuan, while the pharmaceutical and biological sector saw a net outflow of 3.371 billion yuan [1] Beauty and Personal Care Industry - The beauty and personal care sector declined by 1.36%, with a net outflow of 223 million yuan [2] - Out of 29 stocks in this sector, 8 rose while 21 fell [2] - The top three stocks with the highest net outflow included Aimeike, Pola, and Qingdao King, with outflows of 73.5801 million yuan, 27.1153 million yuan, and 24.1188 million yuan respectively [2] Capital Flow in Beauty and Personal Care - The top stock with net inflow in the beauty sector was Shuiyang Co., with an inflow of 13.0672 million yuan [3] - Other notable inflows were from Runben Co. and Jinsong New Materials, with inflows of 4.8789 million yuan and 2.4414 million yuan respectively [3] - The overall capital flow data indicates a challenging environment for the beauty and personal care sector, with significant outflows from major companies [2][3]

Overview - The demand for body powder has been increasing due to rising national income levels and health awareness, particularly among female consumers and the elderly [1][8] - In 2022, China's body powder sales reached 482 million yuan, a year-on-year increase of 1.69%, but in 2023, sales declined to 467 million yuan, a decrease of 3.01% [1][8] - The sales decline is expected to slow in 2024, with projected sales of 456 million yuan, a decrease of 2.40% year-on-year [1][8] Industry Chain - The upstream of the body powder industry includes suppliers of raw materials such as talc, corn starch, and packaging materials [4] - The midstream consists of body powder manufacturing companies, while the downstream includes sales channels like supermarkets, specialty stores, and e-commerce platforms [4] Consumer Demographics - The consumer age structure shows that infants (0-3 years) account for 50% of the market, adults (18-55 years) make up about 32%, and the elderly (55 years and above) represent around 10% [5] - Safety of ingredients is the primary concern for over 70% of consumers, with a strong preference for "talc-free" products [5] Regulatory Environment - The body powder industry is facing stricter regulations due to the "Healthy China" initiative, with various policies aimed at improving product safety and quality [6] Market Trends - The body powder market is shifting towards natural ingredients like corn starch and bamboo charcoal, with a growing demand for multifunctional products that offer additional benefits such as moisturizing and soothing [6][10] - The industry is expected to become more segmented, with customized products for different age groups and skin types [10] Competitive Landscape - The market is highly competitive, featuring both international brands like Johnson & Johnson and domestic brands such as Red Elephant and Shanghai Jahwa [9] - Shanghai Shangmei and Shanghai Jahwa are notable players, with significant revenue and product offerings in the body powder segment [9][10]

Investment Rating - The report initiates coverage with a "Buy" rating for the company Water Sheep Co., Ltd. [14] Core Insights - The cosmetics and medical beauty sector has underperformed the market, with the Shenwan Beauty Care Index declining by 2.5% from September 12 to September 19, 2025 [3][4] - The upcoming Double 11 shopping festival is expected to drive significant growth for domestic brands, with recommendations to focus on strong alpha stocks [9][10] - Water Sheep Co., Ltd. is highlighted for its dual business model of proprietary and CP brands, with stable revenue projections of 4-5 billion yuan from 2021 to 2024 and an expected gross margin of 63.01% in 2024 [10][11] Summary by Sections Industry Performance - The cosmetics and medical beauty sector has shown weaker performance compared to the market, with specific indices declining [3][4] - The Shenwan Cosmetics Index fell by 2.6%, while the Shenwan Personal Care Index decreased by 0.6% [4][6] Upcoming Events - The Double 11 shopping festival preparations are in full swing, with domestic brands like Up Beauty and Proya launching new products to capture market share [9] - Key influencers are negotiating promotional strategies to enhance sales during the festival [9] Company Focus: Water Sheep Co., Ltd. - Water Sheep Co., Ltd. is positioned as a leading tech-driven beauty company with a stable revenue forecast and improving profit margins [10][11] - The company has a well-structured brand matrix and is expanding its high-end product lines, with significant growth in its proprietary brands [11][12] - Expected net profits for Water Sheep Co., Ltd. are projected to be 258 million, 331 million, and 398 million yuan for 2025, 2026, and 2027, respectively, indicating substantial growth [14] Market Trends - The Chinese beauty market is witnessing a shift towards domestic brands, with significant market share gains for local players [27] - The overall retail sales of cosmetics showed a growth of 5.1% in August 2025, indicating a recovery in consumer spending [18][21] International Recognition - Chinese beauty brands performed notably at the IFSCC conference, showcasing their advancements in cosmetic science and securing significant awards [22][24]

Core Viewpoint - The Shanghai municipal government has approved measures to promote the high-quality development of the cosmetics industry, positioning it as one of the six key industries for development in the city, aiming to enhance the global competitiveness of "Shanghai-made" cosmetics [1][2]. Group 1: Policy Measures and Industry Impact - The newly introduced measures address critical gaps in the domestic cosmetics industry, with local brands holding 22 out of the top 50 but only capturing 39.98% of total retail sales [2]. - The measures emphasize multi-dimensional development paths, including market opportunity capture, product variety enhancement, quality improvement, and brand creation [2]. - The focus on technological empowerment and innovation aims to integrate traditional and modern cultural elements into "national trend products" [2][3]. Group 2: Local Company Initiatives - Shanghai Jahwa United Co., Ltd. is leveraging the new policies to enhance its brand "Herborist," which has successfully entered international markets, including flagship stores in Europe [2]. - On the other hand, Shanghai-based company Shiseido's Smart Manufacturing initiative is set to launch a smart factory with an investment of 300 million yuan, featuring AI-driven production capabilities [3]. Group 3: Industry Cluster Advantages - The "Oriental Beauty Valley" in Fengxian District hosts over one-third of Shanghai's cosmetics companies, contributing to a nearly 100 billion yuan industry scale and serving as the largest cosmetics import-export port in China [4]. - The Fengxian Customs has implemented measures to enhance efficiency in customs processes, with cosmetics import-export value reaching 905 million yuan in the first half of the year, a 7.18% increase year-on-year [4]. - The industry benefits from a combination of cluster advantages, innovation in research and development, and access to international resources, which are essential for enhancing global brand influence [4].

Market Overview - The cosmetics sector experienced a decline of 2.24% on September 18, with Lafang Jiahua leading the drop [1] - The Shanghai Composite Index closed at 3831.66, down 1.15%, while the Shenzhen Component Index closed at 13075.66, down 1.06% [1] Individual Stock Performance - Lafang Jiahua (603630) closed at 25.75, down 6.74% with a trading volume of 100,500 shares and a turnover of 263 million yuan [1] - Shuiyang Co. (300740) closed at 21.41, down 3.65% with a trading volume of 225,300 shares [1] - Shanghai Jahwa (600315) closed at 26.41, down 3.51% with a trading volume of 106,700 shares [1] - Other notable declines include Jiaheng Jiahua (300955) down 3.22% and Beitaini (300957) down 2.55% [1] Capital Flow Analysis - The cosmetics sector saw a net outflow of 385 million yuan from institutional investors, while retail investors contributed a net inflow of 363 million yuan [1] - The table indicates that retail investors were more active, with a net inflow of 21.49 million yuan in Lafang Jiahua despite its overall decline [2] - Notable net outflows from institutional investors were observed in companies like Beitaini and Furuida, with outflows of 15.90 million yuan and 20.48 million yuan respectively [2]

Core Insights - Shanghai Jahwa, a leading daily cosmetics company in A-shares, has established an innovative research and development center focusing on synthetic biology, disruptive innovation, and commercial value transformation [1] Group 1: Company Developments - The newly established Shanghai Jahwa Innovation R&D Center for Synthetic Biology marks a significant advancement in the company's R&D capabilities, shifting focus from product development to raw materials and beauty technology [1] - The center aims to enhance the company's emphasis on synthetic biology and disruptive innovation, indicating a strategic pivot in its research approach [1]

Core Viewpoint - Shanghai Jahwa has successfully registered five new raw materials with the National Medical Products Administration, focusing on the development and application of Chinese characteristic plants, which is seen as a significant opportunity for the company to leverage its unique resources in the beauty industry [1][2]. Group 1: R&D Strategy and Achievements - The company reported a revenue of 3.478 billion yuan in the first half of 2025, representing a year-on-year growth of 4.75%, while the net profit attributable to shareholders was 266 million yuan, up 11.66% [1]. - R&D expenses increased by 26% during the same period, reflecting the company's commitment to innovation and development [1][11]. - The R&D structure is divided into three main areas: basic research, product development, and project support, covering the entire process from raw material development to product quality control [3]. Group 2: Focus on Chinese Characteristic Plants - The company aims to deepen the research and application of Chinese characteristic plants, which are perceived as complex systems with multiple components and mechanisms, rather than relying on single-target research approaches [4]. - Shanghai Jahwa has established a database for external beauty prescriptions based on traditional Chinese medicine, utilizing AI technology to explore the potential of "Chinese ingredients" [4]. Group 3: Collaboration and Innovation - The company has partnered with the Chinese Academy of Traditional Chinese Medicine to establish a joint laboratory focused on the skin health benefits of Artemisia annua and other Chinese characteristic plants [7]. - A new innovation R&D center focusing on synthetic biology has been established, aiming to leverage gene editing and microbial engineering to create new cosmetic ingredients [9][10]. Group 4: AI and Digitalization - The company is exploring AI and digital capabilities, including an AI skin detection program developed in collaboration with Megvii Technology, which analyzes skin conditions based on facial data [11]. - R&D investments have steadily increased from 151 million yuan in 2020 to 179 million yuan in 2024, with a focus on enhancing the R&D system, medical research collaboration, and product innovation [11].

Core Viewpoint - The application of AI network pharmacology is essential for understanding the complex systems of traditional Chinese plants, which consist of multiple components, targets, and pathways [1] Company Summary - Shanghai Jahwa (600315.SH) is pioneering the establishment of a database for external beauty formulas based on traditional Chinese medicine, aiming to explore and utilize "Chinese ingredients" [1] - The Chief R&D Officer, Jia Haidong, emphasizes that traditional research methods focusing on single targets and components are insufficient for explaining the efficacy mechanisms of these complex systems [1]

Market Overview - On September 17, the cosmetics sector declined by 0.24% compared to the previous trading day, with Qingsong Co. leading the decline [1] - The Shanghai Composite Index closed at 3876.34, up 0.37%, while the Shenzhen Component Index closed at 13215.46, up 1.16% [1] Individual Stock Performance - Notable stock performances in the cosmetics sector included: - Tian Cai Ya (603605) closed at 81.77, up 0.85% with a trading volume of 44,700 shares and a transaction value of 364 million [1] - Fu Rui Da (600223) remained unchanged at 7.91 with a trading volume of 70,100 shares [1] - Shanghai Jahwa (600315) closed at 27.37, down 0.04% with a trading volume of 44,200 shares [1] - Other stocks like Marubi (603983) and Beitaini (300957) also experienced slight declines of 0.05% and 0.88% respectively [1] Capital Flow Analysis - The cosmetics sector saw a net outflow of 105 million from institutional investors, while retail investors experienced a net inflow of 54.72 million [2] - The overall capital flow for individual stocks showed varied trends, with some stocks like Jia Heng Jia Hua (300955) experiencing significant net outflows from institutional investors [3] Detailed Capital Flow for Selected Stocks - Jia Heng Jia Hua (300955) had a net outflow of 13.34 million from institutional investors, while retail investors contributed a net inflow of 17.15 million [3] - Other stocks like Fu Rui Da (600223) and Shui Yang Co. (300740) also showed mixed capital flows, with institutional outflows and retail inflows [3]

Market Overview - On September 16, the cosmetics sector rose by 0.03% compared to the previous trading day, with Shuiyang Co., Ltd. leading the gains [1] - The Shanghai Composite Index closed at 3861.87, up 0.04%, while the Shenzhen Component Index closed at 13063.97, up 0.45% [1] Individual Stock Performance - Shuiyang Co., Ltd. (300740) closed at 22.48, with a gain of 1.63% and a trading volume of 208,500 shares, amounting to a transaction value of 469 million yuan [1] - Qingdao Kingway (002094) closed at 8.47, up 1.44%, with a trading volume of 326,600 shares and a transaction value of 277 million yuan [1] - Other notable performers include: - Kezhou Co., Ltd. (300856) at 14.23, up 0.57% [1] - Beitaini (300957) at 49.13, up 0.41% [1] - Furuida (600223) at 7.91, up 0.38% [1] Fund Flow Analysis - The cosmetics sector experienced a net outflow of 43.2 million yuan from institutional investors, while retail investors saw a net outflow of 23.0 million yuan [2] - Conversely, speculative funds recorded a net inflow of 66.2 million yuan [2] Detailed Fund Flow for Key Stocks - Shuiyang Co., Ltd. (300740) had a net inflow of 41.1 million yuan from institutional investors, while retail investors faced a net outflow of 71.8 million yuan [3] - Qingdao Kingway (002094) saw a net inflow of 15.3 million yuan from institutional investors, but a net outflow of 7.2 million yuan from retail investors [3] - Other stocks with significant fund flow include: - Beitaini (300957) with a net inflow of 5.7 million yuan from institutional investors and a net outflow of 13.2 million yuan from retail investors [3] - Furuida (600223) faced a net outflow of 10.2 million yuan from institutional investors but a net inflow of 8.9 million yuan from retail investors [3]