Core Viewpoint - The company, Fulejia, announced on September 23 that its products are primarily divided into two categories: medical devices and functional skincare products, featuring a diverse range of formulations including masks, waters, serums, lotions, sprays, single-use products, and eye masks [2] Group 1 - The company offers a wide variety of product forms, which enhances its market coverage [2] - The product categories include both medical devices and functional skincare, indicating a diversified product portfolio [2]

Group 1: Sales Performance - The company's sales channel optimization has shown significant progress, with a 86.68% increase in revenue from Q1 to Q2 2025, indicating a recovery trend that aligns with company expectations [1] - The lactose acid mask launched in August last year has performed very well in sales during the first half of 2025, meeting company expectations [2] Group 2: Product Structure and Development - The company's product range includes medical devices and functional skincare products, featuring various forms such as masks, essences, lotions, and sprays [1] - The company has a robust pipeline of research projects, with ongoing efforts to enhance R&D capabilities following the establishment of a new R&D center in Shanghai [2] Group 3: Online Sales Channels - JD.com has emerged as a strong online sales channel, with the company enhancing its collaboration with JD to diversify product offerings and implement new promotional strategies, resulting in notable growth on the platform [2] Group 4: Future Plans - The company plans to continue launching new products in the upcoming quarters, with specific details to be announced in future communications [2] - Dividend arrangements for the third quarter are still under consideration, with updates to be provided through official announcements [2]

Core Insights - The article discusses the functional skincare product industry in China, highlighting key players, market dynamics, and recent developments in the sector [1][10]. Industry Overview - The functional skincare industry is segmented into upstream (raw materials and packaging), midstream (manufacturing), and downstream (distribution) [1][3]. - Key raw materials include recombinant collagen, hyaluronic acid, and peptides, while packaging materials consist of paper, plastic, and glass [1][3]. Key Players - Major companies in the functional skincare sector include Betaini, Huaxi Biological, Shanghai Jahwa, and international brands like L'Oréal and Estée Lauder [3][10]. - Upstream suppliers include Kesheng Co., Qingsong Co., and Linsen Biological, while contract manufacturers include Norsbel, Cosme, and Yingteli [3]. Regional Distribution - The majority of functional skincare companies are located in China's eastern coastal regions, with Shanghai and Guangdong having the most comprehensive distribution of industry players [5][7]. Recent Developments - Betaini is focusing on its Winona brand for sensitive skin, investing nearly 500 million yuan in a new central factory with an expected annual output value of 5 billion yuan [10][11]. - Huaxi Biological plans to invest over 100 million yuan in strategic innovation and expand production capacity in multiple cities [10][11]. - Shanghai Jahwa is establishing an innovation center for synthetic biology to develop new functional ingredients [10][11]. - Other companies like Chuang'er Biological and Fulejia are also expanding their production capabilities and investing in new technologies [10][11].

Core Insights - The article focuses on the research and development (R&D) investments of listed companies in China's functional skincare industry, highlighting the importance of R&D intensity relative to revenue [1][10]. R&D Investment Overview - The leading company in R&D investment is Huaxi Biological, with a projected investment of 466 million yuan in 2024, representing 8.68% of its revenue [10]. - Other companies like Chuang'er Biological also show significant R&D investment intensity, indicating a competitive landscape in innovation [10]. Key Companies and Their R&D Focus - **Betaini**: Focuses on the R&D of Yunnan specialty plants to address various skin issues and enhance product lines [11]. - **Huaxi Biological**: Concentrates on active ingredient delivery control and efficacy extension projects [10][11]. - **Chuang'er Biological**: Specializes in collagen protein project development [10][11]. - **Fuerjia**: Aims to expand its product line, including Class III medical devices and sunscreen products [10][11]. Production Processes - Functional skincare products include creams, lotions, masks, serums, and emulsions, each with distinct production processes. For instance, Betaini's cream and lotion production involves several key steps, with homogenization and filling being critical control points [1]. Competitive Landscape - The article outlines various brands and their core technologies, such as Vichy and La Roche-Posay from France, which emphasize thermal spring water, and Curel from Japan, which focuses on ceramide care [6][7].

Core Insights - Huaxi Bio reported a revenue of 2.261 billion yuan for the first half of 2025, a year-on-year decline of 19.57% [1] - The net profit attributable to shareholders was 221 million yuan, down 35.38% year-on-year, while the net profit excluding non-recurring items was 173 million yuan, a decrease of 45% [1] - In Q2 2025, the company achieved a revenue of 1.183 billion yuan, a decline of 18.44% year-on-year, but the net profit increased by 20.89% to 119 million yuan, marking the first rebound in net profit margin since Q1 2024 [1] Business Segment Performance - The decline in overall performance is primarily attributed to the skin science innovation transformation business, which generated 912 million yuan in revenue, down 33.97% year-on-year, accounting for 40.36% of the company's main business revenue [1] - This segment had already seen a decline of 31.62% in 2024, indicating a continued contraction that negatively impacts Huaxi Bio's overall revenue [1] - Besides the core skincare business, the raw materials and medical terminal businesses also experienced declines, with raw materials revenue at 626 million yuan (down 0.58%) and medical terminal revenue at 673 million yuan (down 9.44%) [2]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1][7] Core Views - The company reported a revenue of 859 million yuan for the first half of 2025, representing a year-on-year growth of 42.43%, and a net profit attributable to shareholders of 392 million yuan, up 26.65% year-on-year [2][4] - The second quarter of 2025 saw a revenue of 492 million yuan, a year-on-year increase of 30.44%, and a net profit of 224 million yuan, which is a 7.36% increase year-on-year [4] - The company is actively expanding its overseas business, having achieved significant progress in the global layout of its recombinant human collagen medical devices, including obtaining medical device registration in Thailand [4] Summary by Relevant Sections Financial Performance - For the first half of 2025, the company achieved a gross margin of 90.68%, a decrease of 0.9 percentage points compared to the same period last year [4] - Medical device revenue reached 708 million yuan, growing 33.41% year-on-year, with a gross margin of 95.04%, an increase of 0.61 percentage points [4] - Functional skincare products generated 121 million yuan in revenue, a significant increase of 152.39% year-on-year, with a gross margin of 70.78%, up 6.02 percentage points [4] Future Earnings Forecast - The company is expected to have earnings per share of 8.93 yuan and 12.39 yuan for 2025 and 2026, respectively, with corresponding price-to-earnings ratios of 34 times and 24 times [4][6]

Core Viewpoint - Huaxi Biological is experiencing a significant decline in performance, with a notable drop in both revenue and profit in the first half of 2025, primarily due to the structural collapse of its core business in skin science innovation [1][3][4]. Financial Performance - In the first half of 2025, Huaxi Biological reported revenue of 2.261 billion yuan, a year-on-year decrease of 19.57%, and a net profit attributable to shareholders of 221 million yuan, down 35.38% [1][3]. - The company's revenue in Q2 2025 was 1.183 billion yuan, a decline of 18.44% year-on-year, while net profit for the same period was 119 million yuan, marking a 20.89% increase, indicating a potential turning point in profitability [3][4]. Core Business Challenges - The skin science innovation transformation business, previously known as functional skincare products, has seen a revenue decline of 33.97% in the first half of 2025, contributing to 40.36% of the company's main business revenue [3][4]. - The functional skincare business, which had previously driven growth, has seen its revenue shrink from 4.607 billion yuan in 2022 to 2.569 billion yuan in 2024, nearly halving its contribution to main business revenue [4]. Other Business Segments - Besides the core skincare business, Huaxi Biological's other two segments—raw materials and medical terminal businesses—also faced declines, with raw materials revenue at 626 million yuan (down 0.58%) and medical terminal revenue at 673 million yuan (down 9.44%) in the first half of 2025 [5][6]. Reform and Management Changes - The company has initiated a series of reforms since 2024, focusing on business process restructuring, organizational changes, and enhancing management efficiency, but these efforts have yet to yield significant results [6][7]. - In the first half of 2025, there were notable changes in the management structure, with 11 executives leaving and an increase in R&D personnel by 35, although management costs rose by 11.63% [6][7]. R&D Investment - Huaxi Biological increased its R&D expenditure to 231 million yuan in the first half of 2025, a 15.25% increase year-on-year, focusing on high-barrier products and medical terminal business [7]. - The company is currently undergoing a strategic upgrade, shifting its R&D focus towards glycoscience and cell biology, while maintaining that the decline in functional skincare products is not due to missing market opportunities [7].

Core Viewpoint - Huaxi Biological is experiencing a painful period of performance decline, with significant drops in both revenue and net profit in the first half of 2025 compared to the previous year [1][2] Financial Performance - In the first half of 2025, Huaxi Biological reported revenue of 2.261 billion yuan, a year-on-year decrease of 19.57% [1] - The net profit attributable to shareholders was 221 million yuan, down 35.38% year-on-year [1] - In Q2 2025, the company achieved revenue of 1.183 billion yuan, a decline of 18.44% year-on-year, while net profit increased by 20.89% to 119 million yuan [1] Business Segment Analysis - The decline in performance is attributed to a significant drop in the skin science innovation transformation business, which saw a 31.62% decrease in revenue in 2024 and continued to decline in the first half of 2025 [1] - Other business segments, including raw materials and medical terminal businesses, also experienced varying degrees of decline, with raw materials revenue at 626 million yuan, a slight decrease of 0.5% [1][2] Reform and Management Changes - The year 2024 was defined as the "year of reform" for Huaxi Biological, with multiple initiatives launched to reshape business processes and organizational structures [1] - In Q2 2025, the chairman and general manager, Zhao Yan, took direct control of core business segments to accelerate strategic implementation [1][2] - The company reported a turnover in its personnel structure, with 11 executives leaving and an increase of 35 R&D staff, although average salaries decreased year-on-year [2] R&D Investment - In the first half of 2025, Huaxi Biological invested 231 million yuan in R&D, a year-on-year increase of 15.25%, focusing on high-barrier products and bioactive materials [2] - The number of R&D projects decreased by 88 compared to 2024, indicating a shift in focus towards more strategic areas [2] Market Comparison - In contrast to Huaxi Biological, competitor Jinbo Biological reported revenue of 859 million yuan in the first half of 2025, a year-on-year increase of 42.43%, highlighting the competitive pressures in the functional skincare market [2]

Core Viewpoint - Huaxi Biological is experiencing a painful growth period, with significant declines in both revenue and profit in the first half of 2025, primarily due to the structural collapse of its core business, particularly the skin science innovation transformation segment [1][3][4]. Financial Performance - In the first half of 2025, Huaxi Biological reported revenue of 2.261 billion yuan, a year-on-year decrease of 19.57%, and a net profit attributable to shareholders of 221 million yuan, down 35.38% [1][3]. - The company's net profit after excluding non-recurring gains and losses fell by 45%, amounting to 174 million yuan [3][5]. - For Q2 2025, revenue was 1.183 billion yuan, a decline of 18.44%, while net profit increased by 20.89% to 119 million yuan, marking the first recovery in net profit margin since Q1 2024 [3][5]. Core Business Challenges - The skin science innovation transformation business, which previously accounted for nearly half of the revenue, continued to decline, with a 33.97% drop in revenue to 912 million yuan in the first half of 2025 [1][3][5]. - This segment's revenue had already decreased by 31.62% in 2024, indicating a persistent downward trend [3][5]. Business Strategy and Reforms - Since 2024, Huaxi Biological has initiated a series of reforms aimed at improving management efficiency and reviving business performance, including restructuring business processes and enhancing organizational capabilities [7][8]. - The chairman and general manager, Zhao Yan, has taken a hands-on approach to manage core business segments, but the effects of these reforms have yet to be reflected in the financial results [7][8]. R&D and Future Directions - In the first half of 2025, Huaxi Biological invested 231 million yuan in R&D, a 15.25% increase, focusing on high-barrier raw materials and medical terminal businesses [8]. - The company is undergoing a strategic upgrade, shifting its R&D focus towards glycoscience and cell biology, while maintaining that the decline in functional skincare products is not due to missing market opportunities [8][9].

Core Insights - The functional skincare industry in China is undergoing significant adjustments, with leading company Huaxi Biological (688363.SH) facing short-term performance pressures while attempting a strategic transformation [2][10] - Despite a decline in revenue and net profit, there are signs of improvement in operational quality in Q2 2025, indicating potential for long-term value reconstruction [2][5] Financial Performance - In the first half of 2025, Huaxi Biological reported revenue of 2.261 billion yuan, a year-on-year decrease of 19.57%, and a net profit of 221 million yuan, down 35.38% [3] - The net profit margin showed signs of recovery in Q2 2025, with net profit reaching 119 million yuan, a year-on-year increase of 20.89% [5] Business Segment Analysis - The skincare innovation transformation business saw a significant revenue drop of 33.97%, contributing only 40.36% to total revenue, down from 52.1% the previous year [4] - The raw materials and medical terminal businesses demonstrated resilience, with raw material revenue at 626 million yuan, a slight decline of 0.58%, and medical terminal revenue at 673 million yuan, down 9.44% [7][8] Strategic Adjustments - The company is shifting its strategy from "scale-oriented" to "efficiency-oriented," which includes reducing ineffective marketing expenditures [4] - The chairman and general manager, Zhao Yan, is leading a deep adjustment in the skincare segment, which is expected to take about six months for noticeable improvements [10] Cash Flow and Profitability - The overall gross margin remains high at 70.99%, with specific product lines like medical-grade hyaluronic acid achieving margins over 85% [6] - Operating cash flow for the first half of 2025 was 218 million yuan, a decrease of 17.49%, primarily due to reduced sales collections from the skincare business [6]