Summary of Sunscreen Agent Industry Conference Call Industry Overview - The sunscreen agent market is transitioning from a supply-demand imbalance (2021-2023) to a slowdown in growth starting in 2024, with a compound annual growth rate (CAGR) dropping from approximately 10% to 4%-5% as the industry enters a destocking and price fluctuation phase [1][3][4]. Key Points Supply and Demand Dynamics - The market is expected to see inventory levels rise to 4-5 months by 2024-2025, significantly exceeding the healthy level of 3.5 months [2][14]. - The highest price points for traditional sunscreen agents like OMC and Avobenzone reached $13-$14 per kilogram in 2022-2023, while new agents like DHHB and BEMT peaked at $20-$25 per kilogram [4][6]. Cost Drivers - A 30% increase in raw material prices is anticipated due to geopolitical tensions in the Middle East starting March 2026, with a lag of 1-1.5 months for price transmission in new sunscreen agents [1][4]. Competitive Landscape - Domestic manufacturers like Kose and others hold a 40%-45% market share in new sunscreen agents, surpassing BASF's 25%-30% share, driven by a 25%-30% price advantage and supply chain flexibility [1][3][12]. - BASF's net profit margin is below 15%, while Kose's can exceed 20% [1][12]. Technical Barriers - BASF maintains a patent monopoly in BEMT (90% share) and MBBT (85% share), with domestic imitations lacking in purity and compliance, allowing BASF to sustain high margins above 50% [1][6]. Price Strategies - BASF's planned 30% price increase is not uniform across all products and customers, with differentiated pricing strategies based on customer importance and purchasing models [8][12]. - Kose is expected to implement a more moderate price increase of around 10% to maintain market share, potentially leading to significant order switching among non-binding customers [2][14]. Inventory and Market Sentiment - Current inventory levels are high, with a notable lack of replenishment willingness among distributors, contrasting sharply with the 1-1.5 months of inventory seen during the supply-demand imbalance [14]. - The market is characterized by a high dependency on specific products like Tinosorb S and EHT, which are less prone to inventory issues due to their oligopolistic supply structure [14]. Future Outlook - The industry is expected to face challenges in maintaining margins due to rising raw material costs and competitive pricing pressures from domestic players [10][18]. - BASF's strategy includes a focus on maintaining high margins in specialized products while navigating the complexities of supply chain risks and customer pricing strategies [17][18]. Additional Insights - The competitive landscape is further complicated by domestic second-tier manufacturers like Huayang and Meifeng, which can offer more flexible pricing, posing a risk to BASF's market share [18]. - The transition to a more competitive pricing environment may lead to further order losses for BASF if they cannot effectively manage their pricing strategies against domestic competitors [18].

Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of RMB 16.10 [1]. Core Views - The company is currently at a low point in its fundamentals, but several positive factors are accumulating. Inventory destocking by downstream major clients is nearing its end, and there is limited downside for the company's profitability and order prices, with potential for improvement. The new factory in Malaysia, market entry in the US, and new product lines are expected to contribute positively. Therefore, it is anticipated that the company's sales will recover to positive growth in 2026, with price stabilization and improvement potential [1][6][9]. Summary by Sections Supply and Demand - The destocking effect from downstream clients is expected to diminish, leading to a recovery in demand. The company's revenue decline has narrowed significantly, and the impact of destocking is gradually weakening, which may drive a gradual recovery in orders [7]. Price Dynamics - The company’s main raw materials are linked to oil prices, and recent geopolitical tensions have caused international oil prices to rise. This, combined with pre-holiday inventory replenishment, has improved the price differentials of most chemical products. Therefore, there is limited room for further price declines, with potential for upward price adjustments [8]. Sales Growth Potential - The new factory in Malaysia is nearing completion, with trial production preparations underway. The company is also promoting new products such as amino acid surfactants and anti-dandruff agents, which are entering major brand supply chains. Additionally, the US FDA certification for P-S products is progressing, which could open new growth avenues in the US market, the largest sunscreen market globally [9]. Profit Forecast and Valuation - The forecast for net profit attributable to the parent company for 2025E-2027E is maintained at RMB 0.87 billion, RMB 1.64 billion, and RMB 2.47 billion, respectively. The target price has been adjusted to RMB 16.10, reflecting a 31x PE for 2027E, based on clear expectations for supply-demand improvement, potential price increases, and anticipated sales growth [10].

Core Viewpoint - Koss Corporation, known as the "first stock in beauty sunscreen," is experiencing a significant decline in performance, with a projected net profit drop of 78.67% to 84% in 2025 due to decreased sales volume and market price of sunscreen products [1][2]. Financial Performance - In 2024, Koss Corporation's revenue decreased by 5.16% to approximately 2.28 billion yuan, while net profit fell by 23.33% to about 562 million yuan [4][5]. - For the first half of 2025, revenue and net profit are expected to decline by 48.67% and 84.51%, respectively, reaching 721 million yuan and approximately 65 million yuan [6]. - The company's gross profit margin decreased to 44.4% in 2024 due to price reductions in some sunscreen products [5]. Market Dynamics - The sunscreen market is stabilizing after rapid growth, leading to increased competition and a more balanced supply-demand relationship [2][3]. - Koss Corporation's reliance on international markets is significant, with over 86% of its revenue coming from overseas clients [10]. Product Performance - Sunscreen products are the main revenue drivers for Koss Corporation, and any changes in their sales volume and pricing significantly impact the company's overall performance [8][10]. - In the first half of 2025, revenue from cosmetic active ingredients decreased by 54.76%, accounting for approximately 75.4% of total revenue [10]. Strategic Initiatives - Koss Corporation plans to enhance market development efforts, focusing on collaboration with small and medium-sized clients and increasing investment in cosmetic formulation and application research [5][11]. - The company is expanding its product line to include amino acid surfactants and other personal care ingredients to seek new growth opportunities [11]. Research and Development - Despite emphasizing technology innovation, Koss Corporation's R&D expenditure has decreased, with a 39.91% drop in the first half of 2025 compared to the previous year [11].

Core Viewpoint - The company, Keshare Co., has expanded its product offerings in the personal care sector, leveraging its strengths in sunscreen agents to include amino acid surfactants and pyrithione ethanolamine salt (PO) [1] Group 1 - The company has successfully entered the supply chains of leading brands such as Unilever [1] - Sales promotion for the new product lines is progressing in an orderly manner [1]

Core Viewpoint - Koshi Co., Ltd. (科思股份) is facing significant challenges in its business performance, particularly in its sunscreen product segment, leading to a substantial decline in projected profits for 2025 [1][2] Financial Performance - For 2025, the company forecasts a net profit attributable to shareholders between 90 million to 120 million yuan, representing a year-on-year decline of 78.67% to 84% [1] - In the first three quarters of 2025, the company reported operating revenue of 1.116 billion yuan, down 39.93% year-on-year, with a net profit of approximately 77.93 million yuan, a decrease of 84.84% [2] - The gross margin fell from 48.8% in 2023 to 29.7% in the first three quarters of 2025, while the net margin dropped from 30.6% to 6.6% in the same period [2] Business Segment Insights - The core product line of the company includes "active ingredients and raw materials for cosmetics," with sunscreen agents being the primary focus, accounting for over 80% of total revenue [2] - Revenue from this segment decreased from 2.07 billion yuan in 2023 to 1.904 billion yuan in 2024, and more than 54% in the first half of 2025 [2] Market Dynamics - The global sunscreen market is experiencing a slowdown, with the market size reaching 15.287 billion USD in 2023 and an average annual growth rate of approximately 7.6% from 2021 to 2023, which is expected to decline to 4.3% from 2023 to 2028 [5] - Increased competition in the sunscreen market has led to a general decline in product prices, impacting profit margins [5] Competitive Landscape - The company is a major manufacturer of sunscreen agents, holding over 20% market share in 2023, with key clients including global giants like L'Oréal, Procter & Gamble, and Bayer [3] - The company’s overseas business accounted for 89.94% of its revenue in 2023, although this proportion decreased to 86.97% in 2024, with a significant drop in overseas revenue in the first half of 2025 [3][4] Strategic Initiatives - The company is accelerating the construction of a 10,000-ton annual production project for sunscreen products in Malaysia to enhance its supply response capabilities in the European and Southeast Asian markets [3]

Core Viewpoint - The company, KOS (300856.SZ), forecasts a significant decline in net profit for the fiscal year 2025, projecting a net profit attributable to shareholders between 90 million to 120 million yuan, representing a year-on-year decrease of 78.67% to 84.00% [1] Financial Performance - The expected net profit after deducting non-recurring gains and losses is projected to be between 85 million to 115 million yuan, indicating a year-on-year decline of 78.31% to 83.97% [1] Market Conditions - The decline in profit is attributed to a slowdown in demand for sunscreen products and the downstream customers' efforts to digest previous inventory, leading to a decrease in the shipment volume of sunscreen agents compared to the same period last year [1] - Additionally, the market price of sunscreen products has decreased compared to the previous year due to customer inventory reduction and increased market competition, further impacting the net profit attributable to shareholders [1]

Core Viewpoint - The company, Kose Co., Ltd. (300856.SZ), forecasts a significant decline in net profit for the fiscal year 2025, projecting a net profit attributable to shareholders between 90 million to 120 million yuan, representing a year-on-year decrease of 78.67% to 84.00% [1] Group 1: Financial Performance - The expected net profit after deducting non-recurring gains and losses is projected to be between 85 million to 115 million yuan, also reflecting a year-on-year decline of 78.31% to 83.97% [1] - The decline in profit is attributed to a slowdown in demand for sunscreen products and the downstream customers' efforts to digest previous inventory [1] Group 2: Market Conditions - The company's sunscreen product shipment volume has decreased compared to the same period last year due to the aforementioned market conditions [1] - Increased market competition and customer inventory reduction have led to a decline in the market price of sunscreen products compared to the previous year [1]

Core Viewpoint - The company expects a significant decline in net profit attributable to shareholders for the fiscal year 2025, projecting between 90 million to 120 million yuan, which represents a year-on-year decrease of 78.67% to 84.00% [1] Group 1: Financial Performance - The decline in net profit is attributed to a slowdown in demand for sunscreen products and the downstream customers' efforts to digest previous inventory [1] - The shipment volume of sunscreen agents has decreased compared to the same period last year due to these market conditions [1] - Market prices for sunscreen products have also fallen compared to the previous year, further impacting the net profit for the current period [1] Group 2: Non-Recurring Gains - For the fiscal year 2025, the impact of non-recurring gains on the company's net profit is estimated to be around 5 million yuan, primarily from government subsidies and the disposal of non-current assets [1]

Core Viewpoint - The company, Kosh Holdings, anticipates a significant decline in net profit for the year 2025, projecting a decrease of 78.67% to 84.00% compared to the previous year [1] Financial Performance - The expected net profit attributable to shareholders for 2025 is estimated to be between 90 million and 120 million yuan [1] - The projected net profit, excluding non-recurring gains and losses, is anticipated to be between 85 million and 115 million yuan, reflecting a year-on-year decrease of 78.31% to 83.97% [1] Market Conditions - The decline in profit is attributed to a slowdown in demand for sunscreen products and the downstream customers' efforts to digest previous inventory [1] - The market price of sunscreen products has decreased compared to the same period last year due to increased competition and customer inventory reduction [1] Non-Recurring Gains and Losses - For the year 2025, the impact of non-recurring gains and losses on the company's net profit is estimated to be around 5 million yuan, primarily from government subsidies and the disposal of non-current assets [1]

Core Viewpoint - The company, Kesheng Co., Ltd. (300856.SZ), expects a significant decline in net profit attributable to shareholders for 2025, forecasting a range of 90 million to 120 million yuan, representing a decrease of 78.67% to 84.00% compared to the previous year [1] Group 1: Financial Performance - The net profit after deducting non-recurring gains and losses is projected to be between 85 million and 115 million yuan, reflecting a decline of 78.31% to 83.97% year-on-year [1] - The anticipated impact of non-recurring gains and losses on net profit for 2025 is approximately 5 million yuan, primarily from government subsidies and the disposal of non-current assets [1] Group 2: Market Conditions - The decline in net profit is attributed to a slowdown in demand for sunscreen products and the downstream customers' digestion of previous inventory, leading to a decrease in the shipment volume of sunscreen agents compared to the same period last year [1] - Increased market competition and customer inventory reduction have resulted in a drop in market prices for sunscreen products compared to the previous year [1]