Core Viewpoint - Huaxi Biological reported significant marginal improvement in performance for the first half of 2025, with a notable recovery in the second quarter despite an overall decline in revenue and profit for the first half [1][2]. Financial Performance - For the first half of 2025, Huaxi Biological achieved revenue of 2.26 billion yuan, a year-on-year decrease of 19.57%, and a net profit attributable to shareholders of 221 million yuan, down 35.38% [2][3]. - The second quarter saw a revenue of 1.18 billion yuan, a decline of 18.44% year-on-year, but net profit increased by 20.89% to 119 million yuan, marking a return to growth after a year [5]. - Operating cash flow turned positive in the second quarter with a net inflow of 241 million yuan, reversing the outflow from the first quarter [5]. Business Segments - The raw materials segment showed resilience with revenue of 626 million yuan, a slight decline of 0.58%, accounting for 27.70% of total revenue [6]. - The medical terminal business generated 673 million yuan, down 9.44%, with skin-related products contributing 467 million yuan, a decrease of 1.8% [6]. - The skin science innovation transformation business reported revenue of 912 million yuan, down 33.97%, representing 40.36% of total revenue [7]. - The nutrition science innovation transformation business achieved revenue of 38 million yuan, a year-on-year increase of 32.40% [8]. Research and Development - R&D investment totaled 231 million yuan, up 15.25%, with R&D expenses accounting for 10.22% of revenue, an increase of 3.09 percentage points [8]. Management Changes - The company is undergoing transformation with the return of the CEO to frontline operations, focusing on restructuring management and business direction [9][10]. - Significant adjustments include a shift from sales volume to efficiency-oriented marketing strategies, resulting in a 12.46 percentage point decrease in sales expense ratio in the second quarter [10][11].

Investment Rating - The report maintains an "Outperform" rating for the company [2] Core Views - The company has shown signs of a performance turnaround in Q2 2025, with a revenue of 1.183 billion yuan, a year-on-year decline of 18.44%, but a net profit of 119 million yuan, reflecting a year-on-year increase of 20.89% [7] - The company is focusing on building a business moat through technological strength, with a strategic shift towards high-quality product offerings and optimized cost structures [7] - The company is expected to achieve a net profit of 451 million yuan in 2025, with a corresponding PE ratio of 62 [7] Financial Data and Profit Forecast - Total revenue for 2025 is projected at 5.68 billion yuan, with a year-on-year growth rate of 5.7% [6] - The net profit for 2025 is estimated at 451 million yuan, showing a significant year-on-year increase of 159.1% [6] - The gross margin is expected to be 74.8% in 2025, with a gradual increase in ROE from 6.3% in 2025 to 7.5% in 2027 [6][9] Business Segments - The skincare innovation segment reported a revenue of 912 million yuan in H1 2024, a decline of 33.97%, as the company halted price promotion strategies [7] - The raw materials business generated 626 million yuan, a slight decline of 0.58%, while the medical terminal business reported 673 million yuan, down 9.44% [7] - The nutrition science innovation segment saw a revenue increase of 32.40% to 38 million yuan, driven by effective food components [7]

Core Insights - Huaxi Biological Technology Co., Ltd. reported a 20.89% year-on-year increase in net profit attributable to shareholders in Q2 2025, marking the first time since Q1 2024 that both year-on-year and quarter-on-quarter profit margins have improved, indicating initial success of strategic transformation [1] - The company generated a net cash flow of 220 million yuan from operating activities in the first half of the year, with a profit cash ratio of 98.6%, reflecting improved accounts receivable turnover and high-quality business returns [1] - Inventory turnover days decreased from 391 days in Q1 to 321 days in Q2, with inventory value reduced by 75.72 million yuan, demonstrating effective inventory management strategies [1][2] Business Strategy - Huaxi Biological focuses on an integrated business model from raw materials to end products, particularly in the field of aging intervention, providing comprehensive solutions across pharmaceuticals, medical aesthetics, nutritional science, and dermatology [2] - Following a systematic reform initiated by General Manager Zhao Yan in March, the company has restructured its brand communication and organizational framework, shifting from a sales-centric model to a precise marketing loop, resulting in a 12.46 percentage point decrease in sales expense ratio in Q2 [2] - The company has seen significant results from brand adjustments, with the brands "Runbaiyan" and "Kuadi" undergoing changes by the end of Q2, alongside a provision for asset impairment of 48.37 million yuan [2] Revenue Performance - In the first half of 2025, Huaxi Biological achieved 626 million yuan in revenue from its raw materials segment, with international market sales accounting for 52.93%, and double-digit growth in Europe, Southeast Asia, and Japan [3] - The sales volume of the "First" brand HA increased by 23% to 80 tons, generating revenue of 56.58 million yuan, a 61.28% year-on-year increase, while the main brand HA sales volume grew by 9% to 150 tons [3] Research and Development - The company invested 231 million yuan in R&D in the first half of 2025, a 15.25% increase year-on-year, focusing on high-end hyaluronic acid and new bioactive products [4] - Huaxi Biological streamlined 30% of its R&D projects, concentrating on three key areas: extracellular matrix, intercellular communication, and intracellular processes, resulting in 340 new authorized patents, including 29 invention patents [4] - The successful application of "INFIHA Cell Repair Technology" and "CT50 Cell Energy Liquid" has led to over 50% of revenue from barrier repair and anti-aging products [4] Market Positioning - Industry experts believe that Huaxi Biological's strategic adjustments have entered a critical phase, with the profit recovery in Q2 validating the effectiveness of the transformation path [5] - The continuous conversion of R&D results and the enhancement of the high-end product matrix are expected to help the company rebuild competitive barriers in the biomaterials sector [5]

Core Viewpoint - Huaxi Biological is experiencing a significant decline in performance, with both revenue and profit decreasing sharply in the first half of 2025, primarily due to the structural collapse of its core business in skin science innovation [1][3][4]. Financial Performance - In the first half of 2025, Huaxi Biological reported revenue of 2.26 billion yuan, a year-on-year decrease of 19.57% [2][3]. - The net profit attributable to shareholders was 221 million yuan, down 35.38% compared to the same period last year [2][3]. - The net profit after deducting non-recurring gains and losses fell by 45%, amounting to 174 million yuan [2][3]. - The cash flow from operating activities decreased by 17.49%, totaling 218 million yuan [2]. - As of the end of the reporting period, the net assets attributable to shareholders were 7.03 billion yuan, reflecting a 3.27% increase from the previous year [2]. Business Segment Performance - The skin science innovation transformation business, which previously accounted for nearly half of the revenue, continued its decline, with a 33.97% drop in revenue to 912 million yuan, representing 40.36% of the company's main business income [3][4]. - The raw material business saw a slight decline of 0.58%, generating 626 million yuan, while the medical terminal business reported a 9.44% decrease, with revenue of 673 million yuan [5]. Strategic Reforms - Since 2024, Huaxi Biological has initiated a series of reforms aimed at improving management efficiency and business recovery, including restructuring business processes and enhancing organizational talent [6]. - The chairman has taken a hands-on approach to manage core business segments, but the effects of these reforms have yet to be reflected in the financial results [6][7]. - The company is currently undergoing its third strategic upgrade, focusing on research in glycoscience and cell biology [7]. Market Context - The decline in Huaxi Biological's performance contrasts sharply with competitors like Jinbo Biological, which reported a 42.43% increase in revenue in the same period, highlighting the competitive pressures in the functional skincare market [8].

Core Insights - The functional skincare industry in China is primarily driven by online sales channels, with companies like Betaini and Huaxi Biological having established mature online sales strategies [1][5][10] - The contribution of professional channels to the sales of functional skincare products is limited, with most companies focusing on online marketing for rapid growth [2][4] Channel Analysis - **Online Channels**: - Advantages include wide reach and lower costs compared to offline channels, leading to higher profit margins [4] - Major platforms include Tmall, Douyin, Kuaishou, and JD, with private traffic channels also playing a significant role [4] - Disadvantages include rising customer acquisition costs and challenges in consumer repurchase rates [4] - **Offline Channels**: - Advantages include better control over terminal pricing and profit margins, particularly in tier-three and tier-four cities [4] - Disadvantages include higher channel costs and the complexity of entering professional channels [4] Company Strategies - Companies like Betaini and Huaxi Biological have a balanced approach with both online and offline channels, while older brands leverage established offline distribution networks [5][8] - The sales model for most companies in the functional skincare sector involves direct sales online and distribution through dealers offline [7][8] Revenue Insights - In 2024, the online revenue for the functional skincare industry is projected to be led by Proya, with online revenue reaching 9.59 billion yuan, accounting for 88.98% of its total revenue [10]

Core Viewpoint - Huaxi Biological's performance continues to decline, with significant drops in revenue and net profit in the first half of 2025, indicating ongoing pressure on the company's operations [2][5]. Financial Performance - The company's revenue for the first half of 2025 was 2.261 billion yuan, a year-on-year decrease of 19.57% [2][4]. - The net profit attributable to shareholders was 220 million yuan, down 35.38% year-on-year [2]. - The skin science innovation transformation business, which accounts for 40.36% of total revenue, saw a revenue decline of 33.97% to 912 million yuan [5][6]. Business Segments - The skin science innovation transformation business is the most severely affected segment, with a significant drop in revenue [5]. - The raw material business generated 626 million yuan, with a slight decline of 0.58%, while the medical terminal business brought in 673 million yuan, down 9.44% [6]. - The medical products in the terminal business achieved 467 million yuan in revenue, a decrease of 1.8% [6]. Reform Measures - The company has implemented significant reforms, including the return of the general manager to frontline operations to drive change [7]. - Sales expenses decreased by 31.44% year-on-year, attributed to reduced promotional costs in the skin science innovation transformation business [7]. - Research and development investment increased to 10.22% of total revenue, up from 7.13% in the previous year, indicating a strong commitment to innovation despite poor performance [7]. Quarterly Insights - In the second quarter of 2025, the company reported revenue of 1.183 billion yuan, a decline of 18.44% year-on-year, but net profit increased by 20.89% to 119 million yuan [8]. - The net profit margin rose for the first time since the first quarter of 2024, suggesting that reform measures may be starting to yield positive results [8].

Market Overview - The Shanghai Composite Index fell by 1.76% on August 27, with only one industry, telecommunications, showing an increase of 1.66% [1] - The beauty and personal care sector experienced the largest decline, dropping by 3.86%, followed by the real estate sector, which fell by 3.51% [1] Capital Flow - The net outflow of capital from the two markets reached 129.75 billion yuan, with all sectors under Shenwan showing a net outflow [1] - The computer industry had the highest net outflow at 16.31 billion yuan, followed by the pharmaceutical and biological sector with a net outflow of 12.32 billion yuan [1] Beauty and Personal Care Sector - The beauty and personal care sector saw a net outflow of 755 million yuan, with 29 stocks in the sector; only 2 stocks rose while 26 fell [1] - The stocks with the highest net inflow included: - Wanjian Medical: 10.31 million yuan - Jiaheng Jiahua: 6.45 million yuan - Marubi Biological: 3.16 million yuan [1] - The stocks with the highest net outflow included: - Proya: 247 million yuan - Aimeike: 121.78 million yuan - Qingdao Kingking: 84.85 million yuan [1] Individual Stock Performance - Proya (603605) decreased by 7.59% with a turnover rate of 6.81% and a net outflow of 247.03 million yuan [2] - Aimeike (300896) fell by 3.88% with a turnover rate of 2.98% and a net outflow of 121.78 million yuan [2] - Qingdao Kingking (002094) dropped by 3.31% with a turnover rate of 10.87% and a net outflow of 84.85 million yuan [2] - Other notable declines included Huaxi Biological (688363) down by 2.25% and Zhongshun Jierou (002511) down by 4.26% [2]

Market Overview - The medical beauty sector experienced a decline of 3.11% on August 27, with Aimeike leading the drop [1] - The Shanghai Composite Index closed at 3800.35, down 1.76%, while the Shenzhen Component Index closed at 12295.07, down 1.43% [1] Individual Stock Performance - Aimeike (300896) closed at 190.03, down 3.88%, with a trading volume of 62,200 shares and a transaction value of 1.207 billion yuan [1] - Huaxi Biological (688363) closed at 56.87, down 2.25%, with a trading volume of 99,400 shares and a transaction value of 580 million yuan [1] - Jinbo Biological (832982) closed at 304.80, down 3.24%, with a trading volume of 10,300 shares and a transaction value of 319 million yuan [1] - ST Meigu (000615) remained unchanged at 3.33, with a trading volume of 142,300 shares and a transaction value of 47.7013 million yuan [1] Capital Flow Analysis - The medical beauty sector saw a net outflow of 199 million yuan from main funds, while retail investors contributed a net inflow of 153 million yuan [1] - Aimeike experienced a net outflow of 143 million yuan from main funds, with retail investors contributing a net inflow of 98.8281 million yuan [2] - Huaxi Biological had a net outflow of 57.973 million yuan from main funds, but a net inflow of 53.4443 million yuan from retail investors [2]

Core Insights - Huaxi Biological Technology Co., Ltd. reported a revenue of 2.261 billion yuan and a net profit of 221 million yuan for the first half of 2025, facing short-term pressure due to industry conditions but focusing on reform measures for long-term development [2] - The company increased its R&D investment to 231 million yuan, a year-on-year growth of 15.25%, with R&D expenses accounting for 10.22% of revenue, up 3.09 percentage points from the previous year [2] R&D and Product Development - The company successfully launched six new bioactive raw materials, including injection-grade cross-linked sodium hyaluronate and recombinant type III humanized collagen, leveraging eight R&D platforms [2][3] - The injection-grade BloomColla® recombinant type III humanized collagen has 100% homology with human collagen sequences, leading the industry in safety and stability [2] - The food-grade MitoEGT ergothioneine, with 99.9% purity, has been included in the national standard material library, ranking high in compliance usage [2] Technological Advancements - The company made significant progress in the independent R&D and production of high-specification sterile HA raw materials, achieving breakthroughs in technology and industrial production [3] - The injection-grade non-animal source chondroitin sodium completed process validation and initiated medical device documentation registration, supporting high-end medical and innovative drug fields [3] - As of June, the company holds a total of 632 patents, reinforcing its technological barriers and focusing on basic research and application of functional sugars and amino acids [3] Business Performance - The raw material business generated 626 million yuan in revenue, maintaining stability, with a gross margin of 85.09% for pharmaceutical-grade sodium hyaluronate and over 90% for some medical aesthetics and orthopedic raw materials [3] - The medical terminal business achieved revenue of 673 million yuan, with a 20% year-on-year increase in sales of Class III medical devices [3] International Market Expansion - International sales of raw materials reached 331 million yuan, accounting for 52.93% of the company's raw material business revenue [3] - The company experienced nearly 10% continuous growth in sales in Europe, Southeast Asia, and South Korea, and over 20% growth in Japan, benefiting from localized operations in its international strategy [3]

Core Viewpoint - Huaxi Biological has shown a significant stock price increase this year, with a 16.63% rise, indicating positive market sentiment despite recent financial challenges [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]. Business Performance - For the first half of 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's main business revenue composition includes: 47.84% from skin science innovation transformation, 26.80% from medical terminal products, 23.02% from raw materials, and 2.17% from other sources [1]. Shareholder Information - As of July 31, 2025, the number of Huaxi Biological shareholders increased to 32,500, up 1.78% from the previous period, while the average circulating shares per person decreased by 1.75% to 14,799 shares [2]. - The company has distributed a total of 1.138 billion yuan in dividends since its A-share listing, with 528 million yuan distributed over the past three years [3]. Institutional Holdings - As of June 30, 2025, major institutional shareholders include Huaxia SSE Sci-Tech Innovation Board 50 ETF, E Fund SSE Sci-Tech Innovation Board 50 ETF, and Huabao CSI Medical ETF, with varying changes in their holdings [3].