Investment Rating - The report assigns a positive outlook on Beauty Farm Medical and Health Industry, indicating a strong potential for growth following the acquisition of Siyanli [1][5]. Core Insights - The acquisition of Siyanli for RMB 1.25 billion is a strategic move to enhance Beauty Farm's market position in the premium beauty sector, consolidating its leadership alongside Narui'er and Siyanli [1][10]. - The transaction structure includes a mix of cash, acquisition loans, and share issuance, ensuring financial stability and effective integration of Siyanli's operations [2][9]. - The merger is expected to significantly increase the number of stores in key urban areas, enhancing market share and operational synergies [3][10]. - The integration of Siyanli's customer base and resources is projected to boost overall membership and revenue potential, particularly in high-end commercial properties [4][11]. - Siyanli's valuation is attractive, with a lower P/E ratio compared to Beauty Farm and the industry average, providing a margin of safety for investors [5][12]. Summary by Sections Acquisition Details - Beauty Farm announced the acquisition of 100% equity in Siyanli for RMB 1.25 billion, marking a key step in its growth strategy [1][8]. - The acquisition is financed through a combination of internal cash, bank loans, and share issuance, with a total cash consideration of approximately RMB 840 million [2][9]. Market Position - The acquisition will increase Beauty Farm's store network from 552 to 734, solidifying its position as a leader in China's high-end beauty services market [3][10]. - The top 20 core cities contribute about 40% of the beauty services market, with significant revenue generated from first-tier cities [3][10]. Integration and Synergies - The merger is expected to enhance competitive advantages by integrating three leading brands and increasing coverage in high-end commercial properties [4][11]. - The addition of Siyanli's 60,000 members will increase the overall member base by 44%, facilitating cross-selling opportunities [4][11]. Financial Impact - Siyanli's valuation at 14.8x LTM P/E is significantly lower than Beauty Farm's 29.5x, indicating a favorable investment opportunity [5][12]. - The acquisition is anticipated to replicate the successful integration of Narui'er, with potential for improved operational efficiency and profitability [5][14].