Core Viewpoint - The article highlights the competitive landscape of the Chinese cosmetics market, focusing on the success of local brand Proya, which is preparing for an IPO in Hong Kong while facing challenges from both international and domestic competitors [1][23]. Company Overview - Proya, established in 2006 and listed on the Shanghai Stock Exchange in 2017, is headquartered in Hangzhou and has a market capitalization of approximately 29.2 billion RMB [5][9]. - The company has a diverse product range covering skincare, makeup, and personal care, with its main brand contributing over 70% of its revenue [11][23]. Market Trends - In 2024, local cosmetic brands are projected to hold a market share of 49.9% in China, an increase from previous years but still lower than South Korea and Japan [1]. - The per capita spending on cosmetics in China is around 664 RMB, significantly lower than that in developed Asian countries, indicating potential growth as income levels rise [1][21]. Financial Performance - Proya's revenue has shown a growth trend, with figures of approximately 6.39 billion RMB in 2022, 8.90 billion RMB in 2023, and projected 10.78 billion RMB in 2024 [19][20]. - The gross profit margin has remained around 70%, but the company reported a decline in third-quarter performance for 2025, with revenue dropping by 11.63% year-on-year [19][20]. Sales Channels - Over 70% of Proya's revenue comes from online direct sales, with a significant reliance on platforms like Tmall and JD.com [16][17]. - The company has experienced a compound annual growth rate of 44% in online sales from 2019 to 2024, surpassing leading foreign skincare brands [8]. Competitive Landscape - Proya is the only domestic brand among the top five cosmetics brands in China, holding a market share of 1.3% [23]. - The company faces intense competition from international giants like L'Oréal and Shiseido, as well as domestic brands such as Shanghai Jahwa and Huaxi Biological [23]. Future Outlook - The Chinese cosmetics market is expected to grow at a compound annual growth rate of 6.6% from 2024 to 2029, driven by increasing consumer demand for skincare and makeup products [21][23]. - Proya's upcoming IPO aims to raise funds for research and development, brand building, and digital transformation, reflecting its ambition for expansion [9][23].

Core Insights - The company achieved total operating revenue of 5.362 billion yuan in 25H1, representing a year-on-year growth of 7.21% [1] - Total profit reached 998 million yuan, with a year-on-year increase of 11.43% [1] - The net profit attributable to shareholders was 799 million yuan, reflecting a year-on-year growth of 13.8% [1] Revenue Breakdown - The main brand, Proya, generated revenue of 3.979 billion yuan, with a slight decline of 0.08% year-on-year, accounting for 74.3% of total revenue [1] - The sub-brand, Caitang, reported revenue of 705 million yuan, showing a growth of 21.1% year-on-year, contributing 13.2% to total revenue [1] - OR brand revenue surged to 279 million yuan, marking a significant increase of 102.5% year-on-year [1] - Other brands, including Yuefuti and Yuansheng Bota, also showed strong growth, with revenues of 166 million yuan (up 3.3%) and 97 million yuan (up 80.2%) respectively [1] Strategic Focus - The company is focused on creating a core product matrix in skincare, color cosmetics, and personal care, emphasizing consumer needs and scientific skincare [1] - OR brand is enhancing its image as an "Asian scalp health care expert" and expanding its product offerings to strengthen market penetration [1] - The introduction of seasonal limited fragrance wash series aims to build brand differentiation and enhance competitive advantage [1] Profitability and Cost Management - The gross profit margin improved by 3.6 percentage points to 73.4% due to cost reduction and efficiency improvements [2] - The sales expense ratio increased by 2.8 percentage points to 49.6%, primarily due to higher promotional expenses [2] - The net profit margin rose by 0.9 percentage points to 14.9%, driven by the increase in gross profit margin [2] Future Outlook - The company forecasts net profits of 1.79 billion, 1.99 billion, and 2.18 billion yuan for 2025-2027, with respective growth rates of 16%, 11%, and 9% [2] - The current price-to-earnings ratios are projected to be 19, 17, and 15 times for the same period [2] - The company's single product strategy is expected to significantly enhance brand value and operational efficiency [2]

Investment Rating - The investment rating for the company is "Buy" (maintained) [3] Core Views - The company achieved a 13.8% year-on-year growth in net profit attributable to shareholders in the first half of 2025, driven by strong brand momentum [3][6] - The company continues to develop a core product matrix, focusing on skincare, makeup, and personal care, with significant growth in its sub-brands [6] - The main brand, Proya, is innovating around consumer needs and has a clear growth path, supported by strong operational capabilities and management efficiency [6] Financial Performance Summary - In the first half of 2025, the company reported total revenue of 5.362 billion yuan, a year-on-year increase of 7.21%, and a total profit of 999.8 million yuan, up 11.43% [6] - The revenue breakdown shows Proya contributing 3.979 billion yuan (74.3% of total revenue), with significant growth in sub-brands such as OR, which saw a 102.5% increase in revenue [6] - The gross margin improved by 3.6 percentage points to 73.4%, attributed to cost reduction and efficiency improvements [6] Earnings Forecast and Valuation - The company is expected to achieve net profits of 1.793 billion yuan, 1.994 billion yuan, and 2.183 billion yuan for 2025, 2026, and 2027 respectively, with year-on-year growth rates of 15.54%, 11.17%, and 9% [5][6] - The current price-to-earnings (P/E) ratios for the upcoming years are projected to be 19, 17, and 15 [6][8]

Investment Rating - The report maintains a "Buy" rating for the company [7][5]. Core Views - The company achieved a revenue of 5.362 billion RMB in H1 2025, representing a year-on-year increase of 7.21%, with a net profit attributable to shareholders of 799 million RMB, up 13.8% year-on-year [1][5]. - The company plans to issue H shares to accelerate its internationalization strategy and enhance its overall competitiveness [1]. - Despite a slowdown in revenue growth for the main brand, other brands such as OR and 彩棠 showed significant growth, indicating a diversified performance across the brand portfolio [2][5]. Revenue Breakdown - In H1 2025, the main brand, 珀莱雅, generated revenue of 3.979 billion RMB, a slight decrease of 0.08% year-on-year, while 彩棠 saw a revenue increase of 21.11% to 705 million RMB [2]. - The online distribution channels outperformed, with online direct sales generating 3.905 billion RMB, up 4.87% year-on-year, and online distribution channels achieving 1.204 billion RMB, up 25.91% year-on-year [3]. Profitability Metrics - The company reported a gross margin of 73.38% in H1 2025, an increase of 3.56 percentage points year-on-year, while the sales expense ratio rose to 49.59%, reflecting increased promotional activities [4]. - In Q2 2025, the gross margin improved to 73.85%, with a net profit margin of 13.60%, indicating resilience despite a high base effect [1][4]. Earnings Forecast and Valuation - The forecast for net profit attributable to shareholders has been adjusted downwards by 3% for 2025 and 2026, and by 5% for 2027, resulting in projected profits of 1.741 billion RMB, 1.996 billion RMB, and 2.240 billion RMB respectively [5]. - The target price is set at 122.30 RMB, based on a price-to-earnings ratio of 28 times for 2025, reflecting a potential upside from the current market price [5][8].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 112.46 CNY [3][7]. Core Insights - The company reported better-than-expected earnings in Q1, with significant growth from emerging brands [1]. - Revenue and net profit for 2024 are projected to be 10.778 billion CNY and 1.552 billion CNY, respectively, reflecting year-on-year growth of 21% and 30% [6]. - The company is expected to continue expanding its brand portfolio and market share in various segments, including men's skincare and medical post-operative recovery [6]. Financial Projections - The adjusted earnings per share (EPS) forecasts for 2025-2027 are 4.56 CNY, 5.36 CNY, and 6.06 CNY, respectively [2][7]. - The company's revenue is projected to grow from 8.905 billion CNY in 2023 to 15.577 billion CNY in 2027, with a compound annual growth rate (CAGR) of approximately 10.7% [2][10]. - The gross margin is expected to improve from 69.9% in 2023 to 73.0% in 2027, indicating enhanced profitability [2][10]. Brand Performance - The main brand and the Cai Tang brand showed stable performance, while emerging brands like OR and Yuan Se Bo Ta experienced rapid growth, with revenue increases of 71.1% and 138.4%, respectively [6]. - Online sales channels grew by 23.7% in 2024, while offline channels saw a decline of 13.6% [6]. Market Position - The company demonstrated resilience in a challenging consumer environment, maintaining strong performance across its brand matrix [6]. - The report highlights the company's ability to adapt and thrive despite market pressures, positioning it as a leader in the industry [6].