Guotai Haitong Securities(601211) 智通财经· Zhi Tong Cai Jing·2025-06-03 06:27Core Viewpoint - The cosmetics retail sales in China for January to April 2025 showed a year-on-year increase of 4%, underperforming the overall retail market by 0.7 percentage points, but this represents an improvement compared to 2024. The industry is characterized by four key trends: innovation in personal care products, breakthroughs in ingredient technology, rising emotional consumption, and the continuation of affordable consumption [1][3]. Investment Recommendations - The company recommends increasing holdings in the personal care sector, highlighting quality companies that benefit from product innovation and opportunities in Douyin channels, with key recommendations including Ruoyuchen (003010), Dengkang Oral (001328), and Runben Co. [2] - In the beauty sector, structural opportunities are identified, with key recommendations for companies like Jinbo Biological, Juzi Biological, and Marubi Co. that are positioned to benefit from the collagen restructuring trend. Additionally, brands like Maogeping, Shumei Co., Proya (603605), and Shanghai Jahwa (600315) are expected to gain from the overall increase in domestic market share [2]. - Companies expected to bottom out and potentially see a turning point include Lafang Household (603630), Shuiyang Co. (300740), Betaini (300957), Furuida (600223), Huaxi Biological, Fulejia (301371), Meilitiantian Medical Health, and Qingsong Co. (300132) [2]. Industry Overview - Demand remains stable, with the rise of domestic brands in the beauty and personal care sectors accelerating. The cosmetics retail sales for January to April 2025 increased by 4% year-on-year, which is a 0.7 percentage point underperformance compared to the overall retail market, but shows improvement from 2024. The overall demand is stable, with leading domestic brands performing well and the rise of new domestic brands spreading from beauty to personal care categories [3][4]. Trends - The industry is witnessing several trends: 1) Personal care transformation with new products in traditional categories, supported by content e-commerce creating a favorable environment for new product launches [4]. 2) Ingredient innovation, particularly in collagen restructuring, with various types and structural innovations expanding application scenarios [4]. 3) Emotional consumption, where cultural, stylistic, and experiential demands are driving the growth of domestic trends in cosmetics and fragrances [4]. 4) Affordable consumption, where the trend for cost-effectiveness continues under supply-demand resonance, benefiting strong supply chains and well-operated brands [4]. Key Companies - Looking ahead to 2025, the market risk appetite is expected to recover significantly. The beauty sector is characterized by substantial changes and a clear trend of rising domestic brands, indicating strong growth potential and leadership in new consumption [5]. The differentiation among brands is increasing, emphasizing the selection of high-growth targets driven by product innovation and attention to marginal improvements [5].