Investment Rating - The report maintains a positive outlook on the cosmetics and medical beauty sector, indicating strong performance compared to the market [2][3]. Core Insights - Estee Lauder reported a double-digit growth in China, with net sales reaching RMB 29.35 billion, a year-on-year increase of 6%, and profits improving by 127% to RMB 1.12 billion [2][6]. - The Tmall beauty category saw a significant increase of 24% year-on-year in January 2026, indicating a strong start to the year for the beauty market [2][25]. - The report highlights the government's focus on promoting service consumption, which is expected to drive growth in key sectors, including beauty and personal care [7][8]. Summary by Sections Industry Performance - The cosmetics and medical beauty sector outperformed the market, with the Shenwan Beauty Care Index rising by 3.7% from January 30 to February 6, 2026 [3]. - The top-performing stocks in the sector included Betaini (+13.5%), Huaxi Biological (+12.0%), and Beijia Clean (+10.8%) [3]. Company Performance - Estee Lauder's sales in mainland China surged by 13% to RMB 6.44 billion, confirming the recovery of international beauty brands in the Chinese market [2][6]. - The report notes that the overall retail sales of cosmetics in December 2025 grew by 8.8%, with a total retail sales of RMB 465.3 billion for the year, reflecting a steady recovery in consumer spending [18][19]. Market Trends - The report emphasizes the shift in consumer focus towards personalized and high-quality services, with emotional and experiential services becoming new consumption hotspots [8][10]. - The government is implementing measures to stimulate service consumption, which is expected to play a crucial role in driving economic growth [7][8]. E-commerce Insights - The report discusses the acquisition of Beijing Lianshi by Yiwang Yichuang, which aims to enhance AI-driven marketing capabilities, indicating a trend towards digital transformation in the industry [12][13]. - The report highlights the competitive landscape in the e-commerce sector, with domestic brands gaining market share against international competitors [26].