Investment Rating - The report does not explicitly state the investment rating for Cosmax, but it provides detailed financial performance metrics that suggest a positive outlook for the company. Core Insights - Cosmax's revenue for Q2 2025 reached 623.6 billion KRW, representing a year-over-year increase of 13.1%, driven by global expansion and strategic initiatives [2][9] - The gross profit for Q2 2025 was 112.9 billion KRW, up 0.7% YoY, with a gross margin of 18.1%, down 2.2 percentage points YoY [2][9] - Operating profit increased by 30.2% YoY to 60.8 billion KRW, with an operating margin of 9.8%, up 1.3 percentage points YoY [2][9] - Net profit decreased by 38.1% YoY to 21.8 billion KRW, primarily due to foreign exchange losses and repayment of COVID-19 support funds [2][9] Summary by Region Korea - Revenue from the Korean factory was 420.5 billion KRW, up 20.8% YoY, accounting for 67% of total revenue [3][10] - The Korean factory's net profit was 25.7 billion KRW, down 13.9% YoY, with a profit margin of 6.1%, down 2.5 percentage points YoY [3][10] China - Revenue from the China factory reached 148.6 billion KRW, up 0.7% YoY, accounting for 24% of total revenue [4][11] - The Shanghai factory showed strong performance with revenue of 108.6 billion KRW, up 11% YoY, while the Guangzhou factory's revenue declined by 17% YoY [4][11] Southeast Asia - Revenue from Southeast Asia was 43.9 billion KRW, up 23.1% YoY, accounting for 7% of total revenue [5][12] - The Thailand factory performed exceptionally well with revenue of 23.1 billion KRW, up 124% YoY, and a net profit of 2.2 billion KRW [5][12] United States - Revenue from the U.S. factory was 30 billion KRW, down 16.6% YoY, accounting for 5% of total revenue [6][13] - The U.S. factory incurred a net loss of 20.4 billion KRW, compared to a net loss of 9.6 billion KRW in the previous year [6][13]

Core Viewpoint - The traditional beauty retail sector is facing significant challenges as consumer preferences shift towards new categories such as trendy toys, electric vehicles, outdoor sports, and tea brands, leading to a decline in the performance of cosmetic counters in shopping malls [2][11]. Group 1: Market Trends - The closure of SASA International's last 18 offline stores in mainland China highlights the difficulties faced by the beauty retail sector [2]. - In contrast, brands like Pop Mart are thriving, with their offline channels contributing 4.526 billion RMB in revenue, a 40.8% increase year-on-year [16]. - The beauty market in China is projected to reach a total transaction value of 107.382 billion RMB in 2024, with online sales growing by 5.86% while offline sales are expected to decline by 2.28% [7][8]. Group 2: Consumer Behavior - The younger generation, particularly those born after 2000, is less enamored with high-end beauty brands and more focused on product ingredients and suitability [28]. - The traditional allure of high-end cosmetics is diminishing, prompting shopping malls to reallocate resources to more popular categories like trendy toys and outdoor brands [5][6]. Group 3: Retail Strategies - Beauty brands need to innovate their retail strategies by creating emotional connections and cultural experiences, similar to Pop Mart's approach [27][28]. - The success of Pop Mart's retail model, which includes creating engaging cultural spaces and offering unique shopping experiences, serves as a potential blueprint for beauty brands [20][24]. - Brands should consider diversifying their retail formats, such as pop-up stores and automated vending machines, to enhance consumer engagement and reach [22][34]. Group 4: Industry Challenges - The beauty retail sector is experiencing a significant decline, with many department stores reporting sales drops exceeding 50% [5][9]. - The number of cosmetic counters in department stores has decreased by nearly 6,000 from March 2019 to 2023, indicating a shift in consumer preferences [9]. - The traditional beauty retail model is being questioned as brands struggle to adapt to the new consumer landscape dominated by experiential and emotional value [27][34].

Core Insights - Sephora is facing significant challenges in the Chinese market, with declining foot traffic and store closures reflecting a failure in its market strategy and the broader transformation of the beauty retail industry [1][4][6] Group 1: Market Dynamics - The rise of e-commerce platforms has drastically changed consumer behavior, with brands establishing official flagship stores on platforms like Taobao and JD, leading to intense price competition [1][3] - Sephora's pricing strategy is hindered by strict discount controls from brand partners, making it difficult to compete with lower prices offered by official brand channels [1][3] - The emergence of trendy beauty stores offering better pricing and promotional strategies has further eroded Sephora's market share among younger consumers [3][4] Group 2: Brand Strategy - Sephora's exclusive product launch strategy, successful in Western markets, has not resonated in China, where many overseas brands lack local marketing efforts and visibility [4][6] - Delayed entry of popular brands into the Chinese market has resulted in lost consumer interest, as seen with Fenty Beauty, which took four years to enter mainland China after its initial launch in Hong Kong [4][6] - Attempts to collaborate with local brands to create high-end products have not been well received, as consumers perceive these offerings as overpriced and lacking genuine value [4][6] Group 3: Competitive Landscape - The high-end beauty market in lower-tier cities is already dominated by established brands like Chanel and Estée Lauder, making it difficult for Sephora to gain traction [6][8] - Local beauty chains have a better understanding of consumer preferences in these markets, offering more competitive pricing and tailored products [6][8] - Sephora's operational costs in these cities are high, with reports indicating some stores have fewer than 50 customers daily, making profitability challenging [6][8] Group 4: Future Directions - Sephora needs to reassess its strategy in China by accelerating the introduction of exclusive overseas resources and forming genuine partnerships with local brands to create products that balance quality and affordability [8] - The company should focus on providing unique in-store experiences that cannot be replicated online, such as professional skincare consultations and engaging product trials [8] - The challenges faced by Sephora reflect broader issues within the beauty retail sector, raising questions about the core competitive advantages of beauty stores in an increasingly digital marketplace [8]

Core Viewpoint - Lin Qingxuan Biotechnology Co., Ltd. has submitted an application for listing on the Hong Kong Stock Exchange, focusing on the anti-wrinkle and firming skincare market with a strong emphasis on high-end skincare solutions based on natural camellia ingredients [1][2]. Financial Performance - From 2022 to 2024, Lin Qingxuan's revenue grew from 691 million RMB to 1.21 billion RMB, while the net profit attributable to the parent company improved from a loss of 5.87 million RMB to a profit of 187 million RMB [7][9]. - The gross profit margin increased from 78% to 82.5% during the same period [8]. Sales and Distribution - Sales and distribution expenses reached 688 million RMB in 2024, exceeding 50% of the total revenue [1][9]. - The revenue from offline channels decreased from 54.7% in 2022 to 40.8% in 2024, while online channel revenue increased from 45.2% to 59.1% [4][6]. Product Portfolio - As of December 31, 2024, Lin Qingxuan offered 188 SKUs, with significant revenue contributions from essence oils, creams, lotions, and masks, each accounting for over 10% of total revenue [3][4]. Market Position - In 2024, Lin Qingxuan ranked first among all high-end domestic skincare brands in China by retail sales and was the only domestic brand among the top 15 high-end skincare brands, which included both domestic and international brands [2][3]. Use of Proceeds - The funds raised from the listing will be used for brand value enhancement, deepening the multi-channel sales network, and strengthening production and supply chain capabilities [10].

Core Viewpoint - The beauty industry appears to be showing signs of recovery in the capital market, with Lin Qingxuan officially starting its IPO process on May 29, following the successful listing of Mao Geping. The company aims to leverage its star product, Camellia Oil, to penetrate the high-end skincare market in China [1][9]. Financial Performance - Lin Qingxuan's revenue from 2022 to 2024 is projected to be 6.91 billion, 8.05 billion, and 12.1 billion RMB, respectively, with year-on-year growth rates of 16.5% and 50.3% for 2023 and 2024 [2][3]. - The adjusted net profit is expected to shift from a loss of 3.66 million RMB in 2022 to profits of 88.46 million and 200 million RMB in 2023 and 2024, respectively [2][3]. - The gross profit margin is notably high, reaching 82.5% in 2024, indicating strong product pricing power [2][3]. Product Contribution - The Camellia Oil product line contributes nearly 40% of total revenue, generating 4.48 billion RMB in 2024, with its share of total revenue increasing from 31.5% in 2022 to 37% in 2024 [3][4]. - Lin Qingxuan's Camellia Oil has been the top-selling facial oil in China for 11 consecutive years, with cumulative sales exceeding 30 million bottles [3][6]. Marketing and Sales Strategy - The company has significantly increased its online channel revenue, which rose from 45.2% of total revenue in 2022 to 59.1% in 2024, primarily through direct online sales [7][8]. - Marketing and promotional expenses for 2024 are projected to be 365 million RMB, accounting for 53% of total revenue, indicating a heavy reliance on marketing for growth [7][10]. Market Positioning - Lin Qingxuan is positioned as a leading domestic high-end skincare brand, ranking first among Chinese domestic brands in the high-end market according to retail sales [9][10]. - The company primarily targets high-end consumers, with product prices ranging from approximately 200 to 800 RMB [9][10]. Research and Development - The R&D expenditure from 2022 to 2024 is relatively low, with only 2.5% of total revenue allocated to R&D in 2024, highlighting a common issue in the domestic beauty industry of prioritizing marketing over product development [10][11].

Summary of the Beauty Industry Conference Call Industry Overview - The conference call focused on the beauty industry, particularly the performance and strategies of Tmall during the 2025 618 shopping festival [1][3]. Key Points and Arguments - **Changes in Sales Strategy**: Tmall has canceled the cross-store discount mechanism for the 2025 618 event, replacing it with direct discounts and smart coupons to stabilize daily sales growth. This shift aims to enhance user growth and public traffic while merchants rely more on technological discounts [1][4]. - **Sales Targets**: Tmall's overall sales target for the 2025 618 event is set at 862 billion yuan, with a projected growth rate of 13.5%. The beauty category aims for a sales target of approximately 13.2 billion yuan, expecting an 18% growth [3][4]. - **Investment in Marketing**: Tmall is investing heavily in marketing, including 20 billion yuan in cash subsidies for Taobao Live and 30 billion yuan in smart coupon subsidies from Alibaba. The total shelf subsidy has increased to 58 billion yuan [1][8][9]. - **Collaboration with Xiaohongshu**: Tmall has partnered with Xiaohongshu, investing 6.2 billion yuan to enhance advertising and direct traffic from Xiaohongshu to Tmall, aiming to increase store visit rates [1][10]. - **Performance of Key Brands**: Foreign brands like L'Oréal and Estée Lauder are seeing higher average order values and growth rates compared to domestic brands. Foreign brands are expected to grow at about 7-8%, while domestic brands are projected to grow at around 35% [2][12][13]. - **Consumer Behavior**: The post-00s demographic shows a willingness to accept price increases of 30-50% and an increase in purchase frequency and category diversity [4][13]. Additional Important Insights - **Focus on Quality and Brand**: The platform's algorithms and policies are increasingly favoring quality products and established brands, with a notable increase in average order values for leading brands [12][13]. - **Performance of Domestic Brands**: Domestic brands like Perlay and Kefu are aggressively marketing, with their advertising revenue growth outpacing GMV growth by 20-30 percentage points [22]. - **Price Strategy**: The overall merchant gross profit is expected to improve, with less aggressive price competition compared to the previous year [12][14]. - **Growth Targets for Specific Brands**: Various domestic brands have set ambitious growth targets for the 618 event, with some brands like Kefu aiming for a 50% growth rate [15][16][17][18][19]. Conclusion The 2025 618 shopping festival is characterized by strategic shifts in sales mechanisms, significant investments in marketing, and a focus on quality and brand reputation. The beauty industry is poised for growth, driven by both domestic and foreign brands adapting to changing consumer behaviors and market dynamics.

Group 1 - Sanya is actively promoting tourism consumption through various promotional activities and enhanced shopping experiences, particularly in duty-free shopping [2][3] - During the "May Day" holiday, multiple duty-free stores in Sanya launched a series of discounts and promotions, including a fivefold points system and government-issued coupons, significantly boosting consumer spending [2][4] - Creative consumption scenarios, such as themed events and immersive shopping experiences, have been introduced to attract tourists and enhance their shopping experience [2][3] Group 2 - Tourist attractions in Sanya are also popular, with initiatives like the "Thousand Coconut Blind Box" offering valuable prizes and discounts to engage visitors [3] - Sanya's water parks and shopping centers are extending their operating hours and introducing family-friendly events to cater to diverse consumer needs [3][4] - The Sanya Municipal Bureau of Commerce has organized increased inventory and frequent restocking to ensure a steady supply of goods during the holiday season, along with distributing 16 million yuan in consumption vouchers [4]