Core Viewpoint - The beauty brand Proya's recent financial report reveals a significant slowdown in growth, leading to a decline in stock prices and raising concerns about its marketing-heavy strategy over research and development [1][3][18] Group 1: Financial Performance - Proya announced a revenue growth of only 7.21% in its 2025 mid-year report, marking the first time in five years that growth has fallen below double digits [3][18] - The main brand, Proya, experienced a slight decline in revenue of -0.08%, which is a concerning trend for the company [3][18] - Despite the slowdown, Proya declared a substantial mid-term dividend of 315 million yuan, which accounts for nearly 40% of its net profit [5][18] Group 2: Marketing vs. R&D - Proya's marketing expenses have surged to nearly 50% of its revenue, with over 2.6 billion yuan spent in the first half of the year on advertising [11][18] - Research and development expenditures have remained below 2%, indicating a heavy reliance on marketing rather than innovation [11][18] - The company's strategy has been criticized for being more focused on marketing than on developing a technological edge, likening it to selling pre-packaged meals at gourmet prices [9][13] Group 3: Leadership Changes and Market Sentiment - The transition of leadership to the second generation, with Hou Yamen taking over as general manager, has raised concerns among investors, especially as key founding members have been selling off shares [16][18] - The departure of several senior executives, including the financial officer and chief marketing officer, has further fueled market anxiety regarding the company's stability [16][18] - The overall sentiment in the market reflects a growing frustration with Proya's inability to balance its marketing-heavy approach with necessary investments in research and development [14][18]

Core Insights - The 2023 Double 11 shopping festival is characterized by "pre-positioning" and "segmented" strategies, reflecting intensified competition among platforms and a shift from price-driven to value-driven consumer behavior [1][4] - High-end beauty and technology products are emerging as key growth drivers, indicating a trend towards quality, brand, and innovation over mere low prices [1] Group 1: Sales Performance - JD.com initiated its 11.11 sales on October 9, reporting over 52,000 brands with transaction amounts increasing by over 300% year-on-year, and over 3,300 categories seeing over 100% growth [1] - On Tmall, during the first hour of sales on October 20, 80 brands surpassed 100 million in sales, with 30,516 brands doubling their sales compared to the previous year [2] - The beauty sector led the sales surge on Tmall, with brands like Proya and Estée Lauder achieving significant sales milestones within minutes of the sale start [2] Group 2: Live Streaming Impact - Live streaming has become a new growth avenue for brands, with Douyin reporting a 500% year-on-year increase in live sales from over 41,000 merchants during the first phase of Double 11 [3] - On Taobao, several live streaming hosts achieved over 100 million in sales within the first hour, surpassing last year's performance [3] - JD.com also reported a significant increase in live streaming orders, with overall order volume up by over 280% year-on-year [3] Group 3: E-commerce Trends - Content-driven e-commerce and influencer marketing are reshaping the competitive landscape, with platforms focusing on creator ecosystems and content conversion capabilities [4] - The competition has evolved beyond mere sales figures to include innovation in business models, enhanced consumer experiences, and ecosystem competition [4]

Investment Rating - The investment rating for the company is "Buy" (maintained) [2] Core Views - The company has accelerated resource integration by acquiring a 38.45% stake in Huazhixiao, positioning itself as the second-largest shareholder, which is expected to enhance its multi-brand strategy in the cosmetics sector [8] - The company is focusing on multi-track new product incubation, with significant launches in skincare and makeup, which are driving brand growth and market presence [8] - The company plans to issue overseas listed shares (H shares) and list on the Hong Kong Stock Exchange, which is anticipated to improve liquidity [8] - The forecasted net profit for 2025-2027 is projected to be 1.776 billion, 1.963 billion, and 2.162 billion RMB respectively, with corresponding PE ratios of 17.3, 15.7, and 14.2 [8] Financial Performance Summary - Revenue is expected to grow from 8,905 million RMB in 2023 to 14,055 million RMB in 2027, with a revenue growth rate of 39.5% in 2023, tapering to 8.0% by 2027 [7][9] - The net profit is projected to increase from 1,194 million RMB in 2023 to 2,162 million RMB in 2027, with a net profit growth rate of 46.1% in 2023, declining to 10.1% by 2027 [7][9] - The company's EPS is expected to rise from 3.01 RMB in 2023 to 5.46 RMB in 2027, indicating a strong earnings growth trajectory [7][9] Market Performance - The company's stock has shown a performance of -21% over the last 12 months, compared to the -5% to 20% range of the CSI 300 index [4]

Core Insights - The cosmetics sector experienced a slight decline of 0.03% on October 21, with Lafang Jiahua leading the drop [1] - The Shanghai Composite Index closed at 3916.33, up 1.36%, while the Shenzhen Component Index closed at 13077.32, up 2.06% [1] Group 1: Stock Performance - Jinsheng New Material (300849) saw a significant increase of 7.74%, closing at 14.76 with a trading volume of 103,000 shares and a turnover of 148 million yuan [1] - Jiaheng Jiahua (300955) rose by 4.90%, closing at 30.62 with a trading volume of 45,700 shares and a turnover of 137 million yuan [1] - Qing Song Co. (300132) increased by 3.71%, closing at 6.43 with a trading volume of 266,600 shares and a turnover of 170 million yuan [1] - Lafang Jiahua (603630) declined by 2.67%, closing at 22.97 with a trading volume of 61,500 shares and a turnover of 141 million yuan [2] - Shanghai Jahwa (600315) fell by 1.85%, closing at 27.09 with a trading volume of 96,400 shares and a turnover of 262 million yuan [2] Group 2: Capital Flow - The cosmetics sector experienced a net outflow of 11.49 million yuan from institutional investors, while retail investors saw a net inflow of 19.36 million yuan [2] - The main capital inflow was observed in brands like Banlaya (603605) with a net inflow of 10.38 million yuan, while Jinsheng New Material (300849) had a net outflow of 11.78 million yuan [3] - Retail investors showed a significant net inflow in Furuida (600223) with 7.23 million yuan, while the outflow from institutional investors was 3.19 million yuan [3]

Core Insights - Tmall's 2025 Double 11 event saw significant sales growth, with over 80 brands achieving over 100 million yuan in sales within the first hour, surpassing last year's opening day performance [1] - The beauty category performed exceptionally well, with brands like Proya and Estée Lauder reaching 100 million yuan in sales within minutes of the event's start [1] - The home appliance and decoration sector benefited from government subsidies and Tmall's discounts, leading brands like Haier and Midea to achieve rapid sales growth [2] - The 3C digital products category was notably boosted by new product launches, with the iPhone 17 series achieving sales exceeding last year's total within two hours [2] - Live streaming sales also saw a strong performance, with multiple hosts breaking the 100 million yuan sales mark in the first hour, exceeding last year's figures [2] Group 1 - Tmall reported that 30,516 brands doubled their sales compared to last year, with 18,919 brands surpassing last year's total sales in the first hour [1] - The beauty category had eight brands entering the "billion yuan club" within the first ten minutes, indicating a strong market demand [1] - Major sports brands like Fila and Nike also achieved over 100 million yuan in sales within minutes, with several brands showing double-digit growth compared to last year [1] Group 2 - Discounts in the home appliance sector reached as low as 50%, driving significant sales for brands like Stone and Source Wood [2] - The launch of new products in the 3C category, including the iPhone 17 series, contributed to a surge in sales, with Apple Store's iPhone sales exceeding last year's total in under two hours [2] - Tmall's promotional strategy included a total of 500 billion yuan in consumer coupons, marking the largest discount effort of the year [2]

Group 1 - The 2025 Tmall Double 11 sales event saw a rapid increase in brand performance, with 80 brands achieving over 100 million in sales within the first hour, and 30,516 brands doubling their sales compared to last year [1] - Beauty brands led the sales surge, with Polaia breaking 100 million in just 6 minutes, followed by other major brands like Estée Lauder and SK-II achieving significant sales growth within the first hour [1] - Sports and outdoor brands also experienced explosive growth, with Fila, Nike, and Lululemon each surpassing 100 million in sales within the first 15 minutes, and several brands achieving double-digit growth compared to last year [1] Group 2 - The combination of national subsidies and Tmall Double 11 discounts, with prices dropping to as low as 50%, led to a significant increase in sales for home appliance and home improvement brands, with Haier and Midea quickly surpassing 100 million in sales [2] - The launch of the iPhone 17 series on Tmall resulted in explosive sales, with Apple Store's iPhone series exceeding last year's total sales within the first two hours of the event [2] - Live streaming sales also performed well, with several popular hosts achieving over 100 million in sales during the first hour, surpassing the number of hosts who reached this milestone last year [2]

Investment Rating - The report maintains an "Overweight" rating for the industry, with a focus on new consumption sectors such as beauty care, IP derivatives, and gold jewelry [5][29]. Core Insights - The report highlights the positive performance of the beauty care sector during the Double Eleven pre-sale event, with significant sales figures and increased visitor traffic in live-streaming sessions [3][23]. - The adjustment of the Hainan offshore duty-free shopping policy is expected to expand the range of duty-free products and enhance consumer spending [3][23]. - The overall market performance for the week showed mixed results, with retail, social services, and beauty care sectors experiencing declines, while jewelry and general retail sectors performed positively [14][16]. Summary by Sections Market Performance - For the week of October 13-17, 2025, the commerce retail, social services, and beauty care sectors saw declines of 0.45%, 1.72%, and 2.53% respectively, ranking 6th, 11th, and 17th among 31 primary industries [14][16]. - The Shanghai Composite Index fell by 1.47%, while the Shenzhen Component Index and CSI 300 Index dropped by 4.99% and 2.22% respectively [14][16]. Key Industry Events and News - The Ministry of Finance and other authorities announced adjustments to the Hainan offshore duty-free shopping policy, effective November 1, 2025, which includes expanding the range of duty-free products and changing the age requirement for duty-free shopping [3][23]. - The Double Eleven pre-sale event on Tmall saw 14 beauty products surpassing 100 million yuan in sales within the first four hours, with significant growth in visitor numbers during live-streaming sessions [3][23]. - LVMH reported a recovery in the Chinese market during the third quarter, while Kering is in negotiations to sell its beauty division to L'Oreal [3][23]. Investment Recommendations - The report recommends focusing on companies such as Shangmei Co., Juzi Bio, Marubi, Runben, Proya, Chaohongji, and Furuida within the beauty care and new consumption sectors [5][29].

Market Overview - The Shanghai Composite Index rose by 0.63% on October 20, with 26 out of 28 sectors experiencing gains, led by the communication and coal industries, which increased by 3.21% and 3.04% respectively [1] - The market saw a net outflow of 4.601 billion yuan in major funds, with 12 sectors recording net inflows, primarily in the communication sector, which attracted 4.397 billion yuan [1] Sector Performance - The communication sector had the highest net inflow of funds, contributing to its 3.21% increase, while the coal sector followed with a net inflow of 1.148 billion yuan [1] - Conversely, the non-ferrous metals sector experienced the largest net outflow, totaling 4.699 billion yuan, followed by the computer sector with a net outflow of 2.390 billion yuan [1] Beauty and Personal Care Industry - The beauty and personal care sector declined by 0.38%, with a net outflow of 24.996 million yuan [2] - Among the 29 stocks in this sector, 15 saw gains while 12 experienced declines [2] - The top net inflow stock was Shanghai Jahwa, with an inflow of 22.996 million yuan, followed by Liangmianzhen and Jiaheng Jiahua with inflows of 12.992 million yuan and 6.235 million yuan respectively [2] Individual Stock Performance - The stocks with the highest net outflows included Proya, Aimeike, and Huaxi Biology, with outflows of 26.186 million yuan, 23.826 million yuan, and 9.397 million yuan respectively [2] - A detailed table of stock performance indicates various changes in price and turnover rates, highlighting the dynamics within the beauty and personal care sector [3]

Group 1: Stock Recommendations - 吉利汽车 (Geely Auto) has a target price of HKD 32.00, with a current market value of USD 24.8 billion and a PE ratio of 19.01[5] - 零跑汽车 (Leap Motor) is rated as a buy with a target price of HKD 80.00, showing a potential upside of 35%[5] - 极兔速递 (J&T Express) has a target price of HKD 58.00, with a market value of USD 11.7 million and a PE ratio of 11.7[5] Group 2: Performance Overview - The basket of 25 stocks listed in the previous report had an average return of -3.9%, compared to the MSCI China Index return of -3.6%[10] - Out of the 25 stocks, 11 stocks outperformed the benchmark index[10] - The report includes a total of 25 long positions, indicating a diverse investment strategy[10]

Summary of Key Points from Conference Call Records Industry or Company Involved - **Education Sector**: Action Education (EMBA training) - **Hospitality Sector**: Shoulv Hotel - **Retail Sector**: Small Commodity City, Yonghui Supermarket - **Beauty Sector**: Proya, Winona - **Jewelry Sector**: Laopuhuangjin, Zhou Daxing - **Food and Beverage Sector**: Mixue Group Core Insights and Arguments Education Sector - Action Education's performance improved in Q3 after a challenging Q2 due to US-China trade tensions, with expected annual revenue exceeding 300 million and a valuation of 15-16 times earnings, alongside a dividend yield over 6% [1][2] - The company's "Hundred Schools Plan" is anticipated to contribute over 10% to revenue growth next year [1] Hospitality Sector - Shoulv Hotel showed continuous improvement in data, with a target of 2.6 million rooms and an expected annual performance of 900 million, valued at 17-18 times earnings this year and 16 times next year [1][2] Retail Sector - Small Commodity City exceeded expectations with Q3 net profit over 1.7 billion, raising annual profit forecasts to 4.7-4.8 billion, with a valuation of 16-17 times [1][4] - Yonghui Supermarket is stabilizing daily sales after store adjustments, with expectations of reduced losses or profitability next year, supported by self-owned product growth [1][4] Beauty Sector - The beauty sector is benefiting from the Double Eleven shopping festival, with Proya and Winona showing strong sales performance. Proya's valuation is expected to be no more than 20 times in 2025 and 16-17 times in 2026 [1][5][6] Jewelry Sector - Laopuhuangjin is experiencing significant growth, with a projected annual increase of at least 50% and a valuation of under 30 times, expected to grow at least 30% next year with a valuation around 20 times [1][9] - The brand is expanding its presence in overseas markets, with plans to enter Japan by 2026 [10] Food and Beverage Sector - Mixue Group's same-store sales decreased by 7% month-on-month but increased by 6% year-on-year, with expectations of growth as external factors stabilize [11][12] Other Important but Possibly Overlooked Content - The overall consumer sector is currently underperforming, but there are still quality low-priced stocks worth considering [2] - The beauty sector's performance during the Double Eleven festival indicates strong consumer interest, particularly in leading brands [5] - Laopuhuangjin's competitive advantages include strong brand recognition in lower-tier cities and effective management of store openings and closures [7][9] - Yonghui Supermarket's adjustments and self-owned product development are crucial for its recovery and future growth [4][8]