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][28]. Core Insights - The report highlights significant market movements, with the retail trade, social services, and beauty care sectors showing varied performance, ranking 19th, 27th, and 25th respectively among 31 primary industries during the week of September 8-12, 2025 [14][16]. - Key events include Huaxi Biological's strategic investment in Saint Pharma, which focuses on small nucleic acid drugs, and Jinbo Biological's approval for a new injectable collagen product [3][23]. - The report notes a substantial increase in domestic and international flight searches ahead of the Mid-Autumn Festival and National Day holidays, indicating a recovery in travel demand [4][24]. Summary by Sections 1. Weekly Market Review - The retail trade sector increased by 0.85%, while social services and beauty care sectors decreased by 0.28% and 0.23% respectively, compared to the Shanghai Composite Index's increase of 1.52% [14][16]. 2. Key Industry Data and News - The Chinese government allocated 100 billion yuan for childcare subsidies and plans to gradually implement free preschool education [3][23]. - Huaxi Biological invested approximately 138 million HKD in Saint Pharma, acquiring a 9.44% stake, while Jinbo Biological's new collagen product is the first of its kind to enter the pharmaceutical excipient market [23][24]. 3. Key Company Announcements - Jinbo Biological announced management changes, with founder Yang Xia appointed as CEO, and plans for a cash acquisition by Langzi Co. for a controlling stake in a cosmetic surgery hospital [27][28]. 4. Investment Recommendations - The report recommends focusing on companies such as Shangmei Co., Juzi Biological, and Marumi Biological, among others, as potential investment opportunities in the beauty care and new consumption sectors [5][28].

Core Viewpoint - The Chinese beauty industry is experiencing a significant transformation driven by strategic investments in cutting-edge technology and content-driven brands, indicating a shift towards a more integrated and innovative market structure [4][25][28]. Investment Trends - In the first nine months of 2025, Chinese beauty companies completed 13 investments/acquisitions, with disclosed amounts exceeding 5.5 billion RMB, accounting for nearly 60% of the industry's capital flow [4][6]. - Major funding is concentrated in a few leading projects, indicating a selective investment phase, with the top three projects totaling nearly 5.2 billion RMB [6]. - The focus on technology and raw materials is evident, with regenerative medicine and RNA technology becoming key investment areas [7][24]. Strategic Investments - Huaxi Biological's investment in Saintno Pharmaceutical is a prime example of the focus on small nucleic acid drugs, which have significant potential despite the company currently lacking product sales [7][12]. - Proya's investment in Huazhi Xiao aims to build a business ecosystem, leveraging the brand's influence among young consumers and its potential for overseas expansion [10][13]. International Comparison - International giants like L'Oréal and Unilever are also active in the beauty investment space, with L'Oréal completing eight investments and Unilever seven in the first nine months of the year [14][19]. - The investment logic of international players tends to favor acquiring mature brands, while Chinese companies emphasize strategic collaboration and investment in technology [23][24]. Future Outlook - The current investment trends suggest a restructuring of the Chinese beauty industry, moving towards a model supported by technology, content, and global asset integration [25][30]. - The capital influx is raising industry standards, potentially eliminating smaller players lacking differentiation while providing growth opportunities for niche and innovative brands [24][25]. - The evolving landscape indicates that the future of the global beauty industry may be significantly influenced by the capital dynamics within China, potentially leading to the emergence of new world-class beauty giants from the Chinese capital ecosystem [30].

Group 1 - The medical beauty sector experienced a decline of 1.45% on September 16, with Huaxi Biological leading the drop [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] - Key stocks in the medical beauty sector showed varied performance, with Jinbo Biological up 0.66%, Aimeike down 0.81%, and Huaxi Biological down 2.45% [1] Group 2 - The medical beauty sector saw a net outflow of 106 million yuan from main funds, while retail investors contributed a net inflow of 92.11 million yuan [1] - Specific stock fund flows indicated significant outflows for Huaxi Biological and Aimeike, with Huaxi Biological seeing a net outflow of 38.59 million yuan [2] - Aimeike had a net outflow of 67.20 million yuan, while ST Meigu experienced a smaller net outflow of 40.85 million yuan [2]

Core Viewpoint - The return of Zhao Yancai, the founder and chairperson of Huaxi Biological, has initiated a significant internal restructuring and reform within the company, amidst declining financial performance and organizational turmoil [1][3][20]. Group 1: Organizational Changes - Huaxi Biological has seen over 10 executives leave or change positions since the beginning of the year, indicating a major organizational overhaul [3]. - Employees have reported a shift from direct employment to outsourcing, with inconsistent severance packages being offered, leading to uncertainty and dissatisfaction among staff [2][3]. - The company is reportedly relocating a significant portion of its operations from Beijing to Hangzhou, retaining only a small part of its business in Beijing [2][3]. Group 2: Financial Performance - The company's half-year report revealed a revenue of 2.261 billion yuan, a year-on-year decrease of 19.57%, and a net profit of 221 million yuan, down 35.38% [3][22]. - The functional skincare segment, which accounted for 72.45% of the company's main business revenue, saw a significant decline in growth, with a projected revenue of 2.569 billion yuan in 2024, down 31.62% year-on-year [9][22]. - Marketing expenses have surged, with sales costs rising from 5.21 billion yuan in 2019 to 30.49 billion yuan in 2022, constituting nearly 48% of revenue [9]. Group 3: Market Position and Strategy - Huaxi Biological, once a leader in the hyaluronic acid market with a 44% global share, is facing intensified competition and a shift in consumer preferences, leading to a decline in brand loyalty [5][21]. - The company has decided to phase out underperforming brands like Runxiquan, focusing instead on its core brands, Runbaiyan and Kuaidi, in response to market pressures [8][18]. - Zhao Yancai's return is seen as a potential turning point, with efforts to restore governance and strategic direction, although the effectiveness of these measures remains to be seen in upcoming quarters [20][22].

Market Overview - The medical beauty sector increased by 0.3% on September 15, with Huaxi Biological leading the gains [1] - The Shanghai Composite Index closed at 3860.5, down 0.26%, while the Shenzhen Component Index closed at 13005.77, up 0.63% [1] Individual Stock Performance - Huaxi Biological (688363) closed at 59.90, up 1.34%, with a trading volume of 56,000 shares and a transaction value of 334 million [1] - *ST Meigu (000615) closed at 3.13, up 0.32%, with a trading volume of 58,300 shares and a transaction value of 18.19 million [1] - Aimeike (300896) closed at 194.07, down 0.43%, with a trading volume of 28,800 shares and a transaction value of 561 million [1] - Jinbo Biological (832982) closed at 302.60, down 3.69%, with a trading volume of 15,400 shares and a transaction value of 471 million [1] Capital Flow Analysis - The medical beauty sector experienced a net outflow of 46.726 million from institutional investors, while retail investors saw a net inflow of 27.246 million [1] - The sector's overall capital flow indicates a mixed sentiment, with retail investors showing interest despite institutional outflows [1]

Core Viewpoint - Huaxi Biological has shown a significant increase in stock price and market performance, despite a decline in revenue and net profit in the first half of 2025 [1][2]. Company Overview - Huaxi Biological Technology Co., Ltd. was established on January 3, 2000, and went public on November 6, 2019. The company is located in Jinan, Shandong Province, and specializes in microbial fermentation and cross-linking technology platforms [1]. - The company has developed a full industry chain business system that includes raw materials, medical terminal products, functional skincare products, and functional foods, serving global pharmaceutical, cosmetic, food manufacturing enterprises, medical institutions, and end users [1]. Financial Performance - As of July 31, 2025, Huaxi Biological reported a revenue of 2.261 billion yuan, a year-on-year decrease of 19.57%, and a net profit attributable to shareholders of 221 million yuan, down 35.38% year-on-year [2]. - The company has distributed a total of 1.138 billion yuan in dividends since its A-share listing, with 528 million yuan distributed in the last three years [3]. Stock Performance - On September 15, Huaxi Biological's stock price increased by 2.01%, reaching 60.30 yuan per share, with a total market capitalization of 29.045 billion yuan [1]. - The stock has seen an 18.40% increase year-to-date, with a 0.50% rise over the last five trading days, a 12.00% increase over the last 20 days, and a 19.26% increase over the last 60 days [1]. Shareholder Information - As of July 31, 2025, the number of shareholders for Huaxi Biological was 32,500, an increase of 1.78% from the previous period, with an average of 14,799 circulating shares per shareholder, a decrease of 1.75% [2]. - Major shareholders include various ETFs, with notable changes in holdings among the top ten circulating shareholders [3].

Investment Rating - The report initiates coverage with a "Buy" rating for Shuiyang Co., Ltd. [3][13] Core Insights - The cosmetics and medical beauty sector underperformed the market, with the Shenwan Beauty Care Index increasing by 0.2% from September 5 to September 12, 2025, lagging behind the Shenwan A Index by 2.7 percentage points [3][4] - Domestic cosmetics brands showed strong growth in August, with key brands under Shumei Co. achieving a 70% growth rate on Douyin and Taobao platforms, indicating a robust performance despite high base effects [3][9] - The report highlights the upcoming Double 11 shopping festival, suggesting that brands should prepare for promotional strategies [3][9] Summary by Sections Industry Performance - The cosmetics and medical beauty sector's performance was weaker than the market, with declines in the Shenwan Cosmetics Index by 0.5% and the Shenwan Personal Care Index by 0.8% during the specified period [3][4] Key Company Review - Shuiyang Co., Ltd. is positioned as a leading technology-driven beauty company in China, with stable revenue between 4 to 5 billion yuan from 2021 to 2024 and an expected gross margin of 63.01% in 2024, up by 10.94 percentage points from 2021 [3][10] - The company has a dual business model of proprietary brands and CP agency brands, with a strong focus on high-end and global market transformation [3][10][12] E-commerce Data - In August, key domestic brands on Douyin and Taobao platforms showed significant growth, with Shumei Co. brands achieving a 70% increase, and other brands like Maogeping and Runben also reporting substantial growth rates [3][14] Market Trends - The report notes that the overall retail sales of cosmetics in July 2025 grew by 4.5%, indicating a recovery in consumer spending [3][17] - The domestic skincare market is projected to reach 271.2 billion yuan in 2024, despite a slight decline of 3.7% year-on-year, with domestic brands gaining market share [3][26] Company Announcements - Shumei Co. has appointed Dr. Karl Lintner, a pioneer in peptide beauty, as the chief scientific advisor, aiming to enhance its global competitiveness in research and development [3][21]

Investment Dynamics - Nutrabolt, an American energy drink company, has invested nearly 110 million yuan to increase its stake in Bloom Nutrition [4] - Bloom Nutrition, founded in 2019, is well-known on social media for its organic green superfood powders and has expanded its product line to include protein powders, collagen peptides, and super berry products [2] - This investment is expected to provide Bloom Nutrition with strategic growth capital, enhance its production capacity, and strengthen its internal capabilities, while allowing Nutrabolt to further expand its influence in the energy drink sector [2] Brand Dynamics - Inditex Group, the parent company of Zara, reported a 5.1% year-on-year revenue growth to 18.4 billion euros and a slight net profit increase of 0.8% to 2.8 billion euros as of July 31 [15] - Zara is closing smaller stores and shifting towards larger, higher-end retail spaces, with an expected total retail floor area increase of about 5% in the coming year [15] - The closure of smaller stores reflects a broader trend in the fast fashion industry, prioritizing efficiency over scale [15] Corporate Changes - Roberto Lorenzini announced his resignation as CEO of Tod's Group for the Americas, a decision made in agreement with the Della Valle family [23] - Sun Hui, CEO of Baizicui, announced her departure after seven years, indicating challenges in achieving rapid success in a competitive environment [26] - Burger King China appointed Fan Jun as COO and Li Jia as CIO, aiming to strengthen its core team for better market penetration [28]

Market Overview - The Shanghai Composite Index fell by 0.12% on September 12, with 9 out of the 28 sectors rising, led by non-ferrous metals and real estate, which increased by 1.96% and 1.51% respectively [1] - The communication and comprehensive sectors experienced the largest declines, down by 2.13% and 1.95% respectively [1] - Overall, there was a net outflow of 53.64 billion yuan in the main funds across the two markets, with 6 sectors seeing net inflows [1] Sector Performance - The non-ferrous metals sector had the highest net inflow of main funds, totaling 2.168 billion yuan, coinciding with its 1.96% increase [1] - The construction and decoration sector also saw a positive performance with a 0.96% rise and a net inflow of 721 million yuan [1] - In contrast, the non-bank financial sector had the largest net outflow, amounting to 8.138 billion yuan, followed by the electronics sector with a net outflow of 7.517 billion yuan [1] Beauty and Personal Care Industry - The beauty and personal care sector declined by 1.52% with a net outflow of 228 million yuan [2] - Out of 29 stocks in this sector, 5 rose while 24 fell [2] - The top three stocks with the highest net outflows included Aimeike, Shanghai Jahwa, and Proya, with outflows of 55.4558 million yuan, 51.6741 million yuan, and 38.7707 million yuan respectively [2][3] Fund Flow in Beauty and Personal Care - The top stock in terms of net inflow was Shuiyang Co., with an inflow of 12.3562 million yuan, followed by Zhongshun Jierou and Huaxi Biological, with inflows of 10.1629 million yuan and 7.6373 million yuan respectively [2][4] - The table of fund flow indicates that Aimeike had the largest outflow at -55.4558 million yuan, with a decline of 3.03% [3] - Other notable outflows included Shanghai Jahwa at -51.6741 million yuan and Proya at -38.7707 million yuan [3]

Core Insights - The skincare and daily chemical industry in A-share listed companies has shown improvement in inventory status as of the first half of 2025, with only 6 out of 14 selected companies experiencing an increase in inventory scale [1] - Among the selected companies, only 5 have inventory turnover days below 90 days, indicating potential inefficiencies in inventory management for the remaining 9 companies [1] - The inventory turnover efficiency indicators for the industry are concerning, with 6 companies showing prolonged inventory turnover days, which may suggest risks of product obsolescence or slow sales [1] Inventory Analysis - In the first half of 2025, the inventory situation improved for the skincare and daily chemical listed companies, with a notable increase in inventory scale for Jinbo Biological, which had the highest year-on-year growth [1] - Only 5 companies, including Jiaheng Home, Qingsong Co., Proya, Shanghai Jahwa, and Lafang, maintained inventory turnover days below 90, while the other 9 exceeded this threshold [1] - Companies such as Huaxi Biological and Jinbo Biological are among those with longer inventory turnover days, raising concerns about their inventory management practices [1] Market Implications - The prolonged inventory turnover days across several companies may indicate a longer time frame from production to sale, potentially leading to product expiration risks [1] - The overall inventory turnover efficiency in the skincare and daily chemical sector is not optimistic, highlighting a need for companies to improve their inventory management strategies [1]