Investment Rating - The report maintains an "Outperform" rating for the company, indicating an expectation of relative performance exceeding the benchmark index by over 10% in the next 12-18 months [1]. Core Insights - The medical aesthetics industry is experiencing a continuous expansion of its consumer base, currently undergoing a reshuffling phase where a few chain brands are expected to capture a larger market share [4]. - The company has a clear development plan for its light medical aesthetics chain, with specific strategies being formulated to establish itself as an industry leader in the foreseeable future [1]. - The stock price of the company is currently undervalued at $3.16, corresponding to a price-to-earnings ratio of only 12 times for its 50 mature stores, with expectations of significant revenue growth [2]. Summary by Sections Industry Trends - The consumer base for medical aesthetics continues to grow, and the industry is in a reshuffling phase, with larger chain brands likely to dominate the market [4]. Company Expansion Plans - The company plans to open over 35 new stores in the upcoming year, primarily focusing on direct-operated stores in major cities like Beijing, Shanghai, Guangzhou, and Shenzhen [4]. - There are already several stores in the opening process, indicating that the company is on track to meet its expansion goals without significant pressure [4]. Store Performance - The average store size is 400 square meters, with mature stores showing excellent profit margins and net profit rates, suggesting strong long-term performance [4]. Competitive Landscape - The current competition is intense, with many standalone institutions lacking advantages in branding, medical teams, supply chains, and location, making it difficult for them to compete with established chains [4]. Product Pipeline - The company is set to launch multiple products next year, including water light injections, youth needles, silk collagen, and extracellular matrix gels, which are expected to enhance its market position [4].

Industry Trends - The medical beauty industry continues to expand, with a consolidation phase where a few chain brands will capture a larger market share[4] - The distribution of industry profits may change as upstream manufacturers undergo similar consolidation, enhancing the pricing power of large downstream institutions[4] Company Performance and Strategy - The current stock price of New Oxygen (SY US) is $3.16, which is considered undervalued, corresponding to a P/E ratio of only 12 times for its 50 mature stores[2] - Management is confident in opening at least 35 new stores in FY2026, primarily focusing on direct-operated stores in major cities like Beijing, Shanghai, Guangzhou, and Shenzhen[4] - In Q3, 20 stores achieved monthly profitability, with mature stores averaging monthly revenue exceeding RMB 3 million[2] Financial Projections - The target price for New Oxygen is set at $10.00 per ADR, based on a Sum-of-the-Parts (SoTP) valuation method, which includes various business segments with different P/E ratios[2] - The retail business is projected to have a steady operating profit margin of 20%, while the medical beauty chain is expected to achieve a 15% steady operating profit margin[2] Competitive Landscape - The competition is intensifying, with most standalone institutions lacking advantages in branding, medical teams, supply chains, and location, making it difficult to compete with chains[4] - New Oxygen is not overly concerned about traditional institutions due to the significant differences in cost structures and operational dimensions[4]