Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company has experienced a decline in revenue and net profit in H1 2025, with revenue down 7.1% year-on-year to 1.79 billion yuan and net profit down 15.2% to 108 million yuan. The second quarter saw a more significant decline, with revenue down 11.7% and net profit down 16.1% [4] - The report anticipates a recovery in the company's profitability, focusing on the health sector, and maintains a reasonable valuation with the current price-to-earnings ratio (PE) at 35.2 for 2025 [4][5] Financial Performance Summary - H1 2025 revenue by segment: - Cosmetics: 1.094 billion yuan (down 7.7%), with a gross margin of 62.0% (up 0.6 percentage points) - Pharmaceuticals: 207 million yuan (down 13.9%), with a gross margin of 51.8% (down 0.3 percentage points) - Raw materials: 179 million yuan (up 4.2%), with a gross margin of 40.9% (up 1.7 percentage points) - Overall gross margin for H1 2025 was 52.4% (up 0.5 percentage points), indicating improved profitability [5][6] Earnings Forecast - The company has revised its profit forecasts for 2025-2027, now expecting net profits of 246 million yuan, 287 million yuan, and 329 million yuan respectively, with corresponding earnings per share (EPS) of 0.24, 0.28, and 0.32 yuan [4][7] Valuation Metrics - The current PE ratios for 2025, 2026, and 2027 are projected at 35.2, 30.2, and 26.4 respectively, indicating a declining trend in valuation multiples [7][10]

Core Viewpoint - The company reported a decline in revenue and net profit for the first half of 2025, with a focus on the performance of its cosmetics and raw materials businesses [1][2]. Financial Performance - In 1H25, the company achieved revenue of 1.789 billion yuan, a decrease of 7.1% year-on-year, and a net profit attributable to shareholders of 108 million yuan, down 15.2% [1]. - For 2Q25, revenue was 913 million yuan, reflecting an 11.7% decline, with a net profit of 57 million yuan, down 16.1% [1]. - The cosmetics segment generated revenue of 1.094 billion yuan in 1H25, a decrease of 7.7%, with a gross margin of 62.0%, up 0.6 percentage points [2]. Business Segment Analysis - The cosmetics business saw significant growth in the Yilian brand, which achieved revenue of 554 million yuan, up 23.8%, while the Aier Doctor brand experienced a decline of 30.0% to 451 million yuan [2]. - The pharmaceutical products segment generated revenue of 207 million yuan, down 13.9%, with a gross margin of 51.8%, down 0.3 percentage points [2]. - The raw materials and derivatives segment reported revenue of 179 million yuan, an increase of 4.2%, with a gross margin of 40.9%, up 1.7 percentage points [2]. Strategic Initiatives - The company is implementing a "5+N" brand strategy in the cosmetics sector, with the Yilian brand benefiting from promotional activities, leading to a 43% increase in core spray product sales [3]. - The Aier Doctor brand is undergoing adjustments, with positive feedback on the newly launched 287 series [3]. - The company is expanding its pharmaceutical business by developing over 200 hospitals and OTC clients, while also innovating in the "Traditional Chinese Medicine +" sector [3]. Investment Outlook - The company aims to build a beauty and health ecosystem, with strong growth in the Yilian brand and contributions from the raw materials business [3]. - The projected net profits for 2025-2027 are 260 million yuan, 297 million yuan, and 339 million yuan, respectively, with corresponding PE ratios of 33.3, 29.1, and 25.6 [3].

Core Insights - The company reported a revenue of 1.79 billion yuan in the first half of 2025, with a net profit of 108 million yuan, and total assets of 6.037 billion yuan as of June 30, 2025 [1][2] Group 1: Cosmetics Business - The cosmetics segment generated a revenue of 1.094 billion yuan in the first half of 2025, with the Yilian brand achieving 554 million yuan, reflecting a year-on-year growth of 23.78% [2] - The Yilian brand launched a global spokesperson, Zhang Linghe, and held a summer spray festival, with spray product line sales reaching 482 million yuan, an increase of 43% [2] - The Aier Doctor brand reported a revenue of 451 million yuan, with new products like the 287 mask and 287 lotion, generating nearly 10 million yuan in sales within two months of launch [2] Group 2: Pharmaceutical Business - The pharmaceutical segment achieved a revenue of 207 million yuan, expanding its client base by over 200 hospitals and OTC customers [2] - Key products include children's flu medication and a popular pain relief product recognized at the Wuzhen Health Conference [2] - The company is actively developing food-medicine integration standards and collaborating with major clients to enhance raw material supply [2] Group 3: Raw Materials and Additives - The raw materials and additives segment reported a revenue of 179 million yuan, with hyaluronic acid sales reaching 116 million yuan, a year-on-year increase of 23.4% [3] - Medical-grade hyaluronic acid sales surged by 287.3%, totaling 16.08 million yuan [3] - The overall gross margin for the hyaluronic acid business improved to 47.1%, up by 8.5 percentage points [3] Group 4: Innovation and R&D - The company launched over 80 new products in the cosmetics sector, including the Aier Doctor 287 mask and Yilian purple essence water [3] - The company introduced a pioneering transdermal collagen technology, enhancing skin penetration by 27.5 times [3] - The company has made significant progress in medical device registrations and drug development, including obtaining production licenses for various products [3]

Core Viewpoint - The third China International Supply Chain Promotion Expo showcases the innovative practices of Shandong Lushang Group, emphasizing a new supply chain model that integrates product co-research, channel collaboration, ecological construction, and financial empowerment [1][3]. Group 1: Supply Chain Innovations - Lushang Group utilizes a "one plate of goods" approach to overcome traditional resource fragmentation and channel disconnection, forming a supply chain platform that integrates various internal and external resources [3]. - The company will present its supply chain highlights at the expo, including products from its subsidiary, Furuida, which features advanced technologies and sustainable practices in the beauty industry [3][4]. - Furuida's star products, such as the hyaluronic acid series and patented collagen technology, will be showcased, demonstrating significant advancements in product efficacy and sustainability [3][4]. Group 2: Collaboration and Product Development - The Shandong Pharmaceutical Institute, a key player in Lushang Group's healthcare sector, recently won a provincial science and technology award for its innovative drug delivery technology, enhancing product efficacy and stability [4]. - Lushang Group's retail arm, Yinzou Group, is focused on deepening partnerships with manufacturers to streamline the supply chain and create a unique commercial ecosystem [4]. - The expo will feature products from various regions in Shandong, highlighting local specialties and Lushang's own brand offerings, thereby reconstructing an efficient demand-production-consumption chain [4]. Group 3: Strategic Initiatives - Yitong Jinfu Supply Chain is implementing the national "dual circulation" strategy by assisting companies like Weifang Sheng'an Food Co., Ltd. in transitioning from export to domestic sales [5]. - The Shandong Innovation Research Institute will showcase self-developed products under its brands, emphasizing high-quality offerings in the tea market [5]. - Lushang Group's wine division, Chateau de Cugat, ensures quality control from grape cultivation to consumer delivery, enhancing the supply chain's transparency and efficiency [6]. Group 4: Agricultural Practices - Lushang's agricultural operations focus on full-chain control from seed to shelf, utilizing standardized planting and traceable farming practices to ensure product quality [6]. - The company employs advanced techniques to maintain the nutritional integrity of its products, showcasing a commitment to sustainable agricultural practices [6]. Group 5: Overall Impact - The expo serves as a platform for Lushang Group to demonstrate its comprehensive supply chain innovations and achievements, with a focus on collaboration and sustainability [6].