Wanlian Securities·2025-05-14 07:35Investment Rating - The cosmetics industry is rated as "Outperform" compared to the market [3] Core Viewpoints - The overall performance of the cosmetics industry has been relatively weak due to internal and external factors, but some companies have achieved impressive revenue and net profit growth through strong product capabilities and flexible marketing strategies. With the gradual economic recovery and the introduction of consumption-boosting policies, further demand recovery is expected in the second half of the year. In the medium to long term, some domestic beauty brands are enhancing R&D investment and standing out due to their outstanding product capabilities amid the rise of domestic trends. Additionally, stricter industry regulations are favorable for compliant leading enterprises. It is recommended to focus on domestic cosmetics leaders with strong R&D, product strength, and marketing capabilities [1][2] Summary by Sections Market Performance - From January 1, 2025, to May 6, 2025, the cosmetics sector rose by 29.07%, significantly outperforming the CSI 300 index by 32.28 percentage points. The brand segment increased by 31.08%, while the raw materials segment faced a decline of 20.37% [10][13] - Individual stock performance highlights include Bawei Co. leading the OEM segment, Ruoyuchen leading the operation segment, and Jinbo Biological, Marubi, and Shanghai Jahwa leading the brand segment [13][14] Financial Performance - Revenue and net profit: The raw materials segment faced pressure, while some leading companies in the OEM and brand segments showed impressive performance. For instance, Bawei Co. reported a revenue increase of 48.27% and a net profit increase of 10.28% in 2024 [16][17] - Gross and net profit margins: Most beauty companies saw an increase in gross margins in Q1 2025. Qing Song Co. improved its profitability due to continuous innovation in cosmetic raw materials and product formula optimization [20][21] - Inventory turnover and operating capital turnover: Bawei Co. had the highest inventory turnover rate in the cosmetics sector at 6.93 times, while the operating capital turnover rate for the brand segment was also generally above 1 [23] Valuation Situation - The valuation levels of individual stocks are varied. In 2025, the PE ratios for leading companies like Lafang and Ruoyuchen are relatively high at 64 and 49 times, respectively, while companies like Kesi and Fulejia have lower PE ratios of 17 and 18 times [2]