Investment Rating - The investment rating for the company is "Buy" and is maintained [8]. Core Insights - The company has completed four core tasks since the second half of 2024: defining direction, clarifying governance, boosting morale, and eliminating burdens. The results of past promotions are beginning to show in specific products and brands, and the upcoming new product launches and brand promotions are highly anticipated [2][10]. - In the first half of 2025, the company achieved operating revenue of 3.478 billion yuan, a year-on-year increase of 5%, and a net profit attributable to shareholders of 266 million yuan, a year-on-year increase of 12%. However, the net profit excluding non-recurring items decreased by 6% to 221 million yuan [6][10]. - In the second quarter of 2025, the company reported operating revenue of 1.775 billion yuan, a year-on-year increase of 25%, and a net profit of 49 million yuan, marking a turnaround from losses. The net profit excluding non-recurring items was 29 million yuan [6][10]. Financial Performance Summary - In the first half of 2025, the personal care, beauty, innovation, and overseas divisions generated revenues of 1.6 billion yuan, 700 million yuan, 400 million yuan, and 700 million yuan, respectively. The beauty segment saw a growth of 32%, while personal care remained stable with slight growth [10]. - The second quarter of 2025 saw rapid growth in the beauty segment and e-commerce channels, contributing to strong revenue performance. The personal care and beauty segments achieved revenue of 800 million yuan and 420 million yuan, with growth rates of 42% and 56%, respectively [10]. - The improvement in net profit margin in the second quarter of 2025 was primarily due to an increase in gross margin and a decrease in sales expense ratio. The gross margin increased by 5 percentage points year-on-year, mainly driven by the higher proportion of beauty products and an increase in average selling prices across categories [10]. Future Outlook - The company is expected to see earnings per share (EPS) of 0.50 yuan, 0.63 yuan, and 0.85 yuan for the years 2025, 2026, and 2027, respectively. The anticipated new product launches and enhanced brand promotions in the second half of 2024 are expected to drive growth [10].

Investment Rating - The report maintains a "Positive" investment outlook for the beauty and personal care industry, emphasizing the potential of domestic brands in the offline channel [3]. Core Insights - The report highlights the transformation of offline channels as a key growth driver for beauty brands, especially in the context of slowing e-commerce growth [4][5]. - It identifies the need for brands to enhance their offline presence to create a differentiated competitive advantage [5][7]. Summary by Sections 1. Online Channel Competition Intensifies, Offline Channel Advantages Emerge - E-commerce growth is slowing, with China's physical goods online retail expected to reach 13.1 trillion yuan in 2024, growing at 6.5% [4][15]. - The number of internet users in China is projected to reach 1.108 billion by the end of 2024, with an internet penetration rate of 78.6% [4][15]. - New consumption policies are being implemented to boost offline consumption, enhancing brand influence and customer engagement [4][27]. 2. Multi-Dimensional Analysis of Offline Channel Formats - Offline channels serve both sales and brand marketing functions, with a variety of formats emerging to meet consumer needs [40]. - High-end beauty counters are experiencing a phase of quality improvement, with a significant increase in average sales per counter from 3.36 million yuan in 2019 to nearly 5 million yuan in 2023 [46][50]. - The report notes that high-end brands are increasingly occupying the beauty counter space, with a 32% increase in high-end counters from 2019 to 2023 [50][53]. 3. Brand Strategies in Offline Channel Development - Domestic brands are actively expanding their offline presence, with several launching flagship stores in major cities [38][39]. - The report recommends specific companies for investment, including: - Shangmei Co., which is developing a balanced multi-brand matrix [5]. - Shanghai Jahwa, known for its extensive presence in supermarkets and counters [5]. - Proya, which is focusing on offline channels with its energy series [5]. - Betaini, leveraging pharmacy channels to establish a professional image [5]. - Maogeping, which has a unique offline counter layout [5]. - Runben, a leading brand in maternal and infant products, expanding its offline market [5].