Investment Rating - The report maintains a "Positive" investment rating for the cosmetics industry [3] Core Insights - The cosmetics industry is experiencing stable growth with a slight improvement in growth rates, while profitability continues to show differentiation among companies [11][16] - The average revenue growth rate for the cosmetics industry in Q1 and Q2 of 2025 was -8.4% and -2.1%, respectively, indicating a slight improvement in the second quarter [16] - Online sales channels, particularly Tmall and Douyin, have shown a year-on-year growth of 13.1% in the first half of 2025, reflecting a recovery in consumer demand [11] Summary by Sections Cosmetics: Stable Growth and Business Adjustments - The cosmetics industry showed a year-on-year growth of 3.1% and 2.6% in Q1 and Q2 of 2025, respectively, with a significant improvement compared to the -1.1% growth in 2024 [11] - The industry is characterized by a slight improvement in growth rates, with the overall growth falling into a stable range [11] Revenue: Differentiation Among Brands - The average revenue growth for the brand segment was 0.4% and 6.5% in Q1 and Q2 of 2025, respectively, indicating stronger resilience compared to upstream and downstream segments [16] - Mid-sized brands like Maogeping and Shangmei have achieved good growth amidst a stable industry backdrop, while leading companies like Proya continue to grow steadily [16] Gross Margin Trends - The average gross margin for the brand segment increased by 1.6 percentage points in the first half of 2025, driven by improved business structures and effective price control by certain brands [21] - Specific brands like Water Sheep and Beitaini have seen significant improvements in gross margins due to product upgrades and price management strategies [21] Product Innovation: Focus on Core Series and Efficacy Expansion - Brands are focusing on upgrading core product lines and expanding efficacy categories, particularly in sunscreen and whitening, with increased competition expected [25] - New product launches include Proya's whitening series and Beitaini's anti-aging products, indicating a trend towards enhancing product offerings [25] Sales Expenses: Rising Industry Rates - The average sales expense ratio for brands in the first half of 2025 was 44.7%, reflecting a year-on-year increase of 1.7 percentage points, influenced by rising competition and platform costs [31] - The narrowing of gross sales margins indicates ongoing pressure on profitability across the industry [31]

Core Viewpoint - The company reported strong revenue and profit growth in the first half of 2025, indicating robust performance across various product lines and channels [1][2]. Revenue Performance - In H1 2025, the company achieved revenue of 3.113 billion yuan, representing a year-on-year increase of 22.52% [1]. - Revenue breakdown by product category: - Efficacy skincare products: 2.410 billion yuan, accounting for 77.4%, with a growth of 24.2% - Medical dressings: 693 million yuan, accounting for 22.3%, with a growth of 17.1% - Health food and others: 10 million yuan, accounting for 0.3%, with a growth of 16.3% [1]. - Revenue breakdown by sales channel: - Direct sales: 2.325 billion yuan, accounting for 74.7%, with a growth of 26.5% - Distribution: 787 million yuan, accounting for 25.3%, with a growth of 12.1% [1]. Profitability Metrics - The company reported a gross margin of 81.68%, down by 0.72 percentage points, and a net profit margin of 37.98%, also down by 0.72 percentage points [2]. - The decline in gross margin was attributed to product category expansion, while supply chain cost optimization mitigated some of the downward trend [2]. Cost Management - The company's expense ratio decreased to 37.99%, down by 1.63 percentage points, with a sales expense ratio of 34.01%, down by 1.10 percentage points [2]. - R&D expense ratio decreased to 1.32%, down by 0.59 percentage points, due to the transition of some R&D projects to commercialization and reduced share-based compensation [2]. R&D and Product Development - The company is enhancing its R&D capabilities and expanding its product matrix, which is expected to support long-term growth [2]. - New product launches, such as the collagen stick 2.0 and collagen mask 3.0, have received positive consumer feedback, indicating strong product vitality [2]. Future Outlook - The company is expected to achieve revenues of 7.056 billion yuan, 8.790 billion yuan, and 10.568 billion yuan from 2025 to 2027, with net profits of 2.538 billion yuan, 3.189 billion yuan, and 3.867 billion yuan respectively [3]. - The company maintains a strong position in the collagen protein sector, with anticipated improvements in industry standing and penetration rates [3].

Core Viewpoint - The company's 1H25 performance met expectations, with revenue of 3.11 billion yuan, a year-on-year increase of 22.5%, and a net profit attributable to shareholders of 1.18 billion yuan, up 20.2% year-on-year [1][2] Financial Performance - Revenue for 1H25 reached 3.11 billion yuan, reflecting a 22.5% year-on-year growth - Net profit attributable to shareholders was 1.18 billion yuan, representing a 20.2% increase year-on-year - Adjusted net profit stood at 1.21 billion yuan, with a year-on-year growth of 17.4% [1] Product Development and Market Trends - The product matrix continues to expand, driving rapid revenue growth for key brands: - Revenue for Kefu Mei was 2.54 billion yuan, up 22.7% year-on-year - Keli Jin generated 500 million yuan, with a year-on-year increase of 26.9% - Performance of key products includes: - Kefu Mei's collagen stick ranked first in Tmall's liquid essence sales during the 618 shopping festival - Keli Jin's upgraded collagen mask performed well [1][2] Profitability and Cost Management - Gross margin slightly declined by 0.7 percentage points to 81.7% due to changes in product mix - Sales expense ratio decreased by 1.1 percentage points to 35.1%, attributed to improved operational efficiency across online platforms - Net profit margin decreased by 0.7 percentage points to 38.0%, maintaining industry-leading profitability [2] Future Outlook - Short-term impacts from previous events are gradually dissipating, with clear marketing and promotional plans for the second half of the year - The company is expected to see further operational improvements in its cosmetics business and steady progress in its medical aesthetics pipeline [2] Earnings Forecast and Valuation - The profit forecast for 2025-2026 is maintained at 2.5 billion and 3.2 billion yuan respectively - Current stock price corresponds to a 20x and 16x P/E for 2025 and 2026, with a target price of 82 HKD, indicating a 57% upside potential [3]

Investment Rating - The report maintains a "Positive" investment rating for the beauty industry [3] Core Insights - The beauty industry is experiencing stable growth, with a notable performance in the collagen restructuring segment [1][5] - The overall revenue growth for the cosmetics sector has shown slight improvement, with a year-on-year increase of 3.1% in Q1 2025, recovering from previous negative growth [12][19] - The average revenue growth for the cosmetics industry is projected to be 8% in 2024, followed by a decline to -5% in Q1 2025, indicating a trend of increasing differentiation among brands [19] Summary by Sections Cosmetics - The cosmetics industry has shown a steady growth rate, with Q1 2025 marking a recovery from three consecutive quarters of negative growth [12] - Online sales channels, particularly Tmall and Douyin, have seen significant growth, with a combined increase of 17% in Q1 2025 [12] - The average revenue growth for brands has been more resilient compared to upstream and downstream segments, with mid-sized brands like Marubi and Runben achieving good growth despite a generally weak market [19] Medical Beauty - The medical beauty sector has seen a convergence in revenue, while the collagen restructuring segment continues to maintain high growth rates [1][5] Revenue and Profitability - The average revenue growth for the cosmetics industry has been declining, with a notable differentiation in performance among brands [19] - The average gross margin for the brand segment has slightly increased, attributed to improved business structure and price control measures [20] Product Innovation - Brands are focusing on upgrading main product lines and expanding functional categories, particularly in sun protection and whitening, with increased competition expected [25] - New product launches include significant upgrades in major brands like Proya and Bethany, focusing on whitening and sun protection [24][25] Expenses and Profit Margins - The average sales expense ratio for brands has increased, reflecting heightened competition and rising platform costs [26] - The gross profit margin has generally decreased across the industry, although leading brands like Proya have managed to improve their margins through effective cost management [26][35] R&D and Management Expenses - There is a trend of increasing R&D investment among leading brands, with a shift towards foundational research [45] - Management expense ratios have shown a divergence, with leading companies optimizing their expenses while others have seen increases due to business adjustments [45]