Investment Rating - The report gives a "Buy" rating for the company, marking its first coverage [1]. Core Insights - The company is expected to achieve stable growth over the next three years through its "2+2+2" strategy, which focuses on skincare, hair care, and maternal and infant care, supported by a rich reserve of new brands [3][4]. - The main brand, Han Shu, maintains a leading position in the anti-aging skincare sector, with significant expansion into men's and color cosmetics, while new brands like NEWPAGE are rapidly gaining traction in the infant skincare market [10][11]. - The company's revenue is projected to grow significantly, with total revenue expected to reach 67.9 billion yuan in 2024, a year-on-year increase of 61.2%, and net profit expected to reach 7.8 billion yuan, up 69.4% [10][11]. Summary by Sections 1. Company Overview - The company is a leading multi-brand cosmetics enterprise in China, focusing on skincare, maternal and infant care, and hair care products. It has successfully built a brand matrix that includes popular brands like Han Shu and NEWPAGE [17]. - The company has experienced strong revenue growth, with a compound annual growth rate (CAGR) of 19.0% from 2020 to 2024, driven by the explosive growth of its main brand Han Shu [31]. 2. Brand Strategy - The "2+2+2" strategy integrates two major brands in skincare, two in maternal and infant care, and two in hair care, creating a diversified brand matrix that meets various consumer needs [42]. - Han Shu accounts for approximately 82.3% of total revenue, with a strong performance in the anti-aging market, while NEWPAGE has emerged as a significant growth driver in the infant skincare segment [46][60]. 3. Financial Performance - The company’s revenue is projected to grow from 42.1 billion yuan in 2023 to 67.9 billion yuan in 2024, with net profit expected to increase from 1.3 billion yuan to 7.8 billion yuan during the same period [31][11]. - The gross margin has improved significantly, rising from 60.9% in 2019 to 75.2% in 2024, reflecting the success of the high-end product strategy [33]. 4. Sales Channels - Online sales have become a major revenue source, with the online channel accounting for 90.5% of total revenue in 2024, driven by the strong performance of Han Shu and the rapid growth of NEWPAGE [37]. - The company has increased its self-operated sales proportion from 46.7% in 2020 to 78.2% in 2024, indicating a shift towards more direct sales strategies [37]. 5. Future Growth Drivers - The company is expanding its brand matrix with new brands targeting specific market segments, such as the high-end infant skincare market with NEWPAGE and the maternal care market with Red Elephant [60][68]. - The focus on innovation and research is expected to drive future growth, particularly in the clean beauty segment with brands like One Leaf [68].

Summary of Shangmei Co., Ltd. Conference Call Company Overview - Shangmei Co., Ltd. reported a revenue of 6.7 billion RMB in 2024, representing a year-on-year growth of 62.1%, with net profit increasing by 74% [2][3] - The company was founded in 2002 and focuses on skincare, hair care, and maternal and infant products, with brands including Han Shu, New Page, Yi Ye Zi, Red Elephant, and Anminyou [3] Core Strategies and Insights - **Brand Premiumization Strategy**: Shangmei adopts a dual-track strategy for brand premiumization, enhancing product efficacy through self-developed core ingredients (e.g., Anminyou's artemisinin oil) and IP collaborations (e.g., with the "Anpanman" brand for maternal and infant care) [2][4] - **Channel Strategy Adjustment**: The company is shifting from a heavy focus on Douyin to a multi-channel approach, with Douyin's channel share slightly decreasing to 75% in Q1 2025, while Tmall and JD.com are gaining share [2][6] - **"2+2+2" Brand Strategy**: This strategy targets mass, mid-to-high-end, and high-end markets across skincare, maternal and infant care, and hair care categories [2][7] Product Performance - **Han Shu Brand**: Han Shu's red waist series 2.0 version has sold over 14 million sets, and new high-margin products like Chatai Super Frequency Cream are expected to enhance profitability [2][8] - **Growth Projections**: The Han Shu brand is expected to achieve approximately 20% growth in 2025, driven by anti-aging, men's skincare, and color cosmetics segments [2][9] Future Growth Drivers - **Emerging Brands**: New Page is rapidly growing in the maternal and infant care market, with plans to expand into teenage care and color cosmetics [2][9] - **New Product Launches**: The upcoming brands, such as Nambeauty and the Anpanman collaboration, are projected to achieve over 100 million RMB in sales in their first year [2][9] Profitability Enhancement Measures - **High-Margin Product Focus**: Increasing the proportion of high-margin new products, such as Han Shu's new offerings, is expected to boost overall gross and net profit margins [2][10] - **Channel Optimization**: A strategic reduction in the proportion of live streaming sales and an increase in self-broadcasting and high-margin channels like Tmall and JD.com will enhance profitability [2][10] - **Sales Expense Reduction**: The company anticipates a gradual decrease in sales expense ratio, projected to drop by about 1 percentage point annually from 2025 to 2027 [2][10] Financial Outlook - Shangmei is expected to achieve revenue growth rates of 24.1%, 20.8%, and 20.7% from 2025 to 2027, with adjusted net profits growing by 33.8%, 21.4%, and 18.8% respectively [2][10]

Investment Rating - The report initiates coverage with a "Buy" rating for the company [4][6]. Core Insights - The company has established itself as a leading domestic beauty group through a multi-brand strategy, with a strong focus on product innovation and market responsiveness [2][18]. - The company is expected to achieve steady revenue growth driven by its main brand, Han Shu, and the gradual ramp-up of its sub-brands [4][31]. Summary by Sections Company Overview - The company has been deeply engaged in the beauty industry for over 20 years, launching multiple brands including Han Shu, Yi Ye Zi, and Hong Se Xiao Xiang, and is preparing to introduce new high-end and baby care brands [1][18]. Financial Analysis - The company experienced a significant revenue increase in 2023, with projected revenues of 67.93 billion and a net profit of 7.81 billion in 2024, reflecting growth rates of 62.08% and 69.42% respectively [5][25]. Business Operations - The company operates a diverse product matrix, with Han Shu accounting for 82% of revenue in 2024, while sub-brands are gradually gaining traction [30][31]. - The company is expanding its channel presence, particularly in Tmall, to complement its strong performance on Douyin [44][47]. Core Advantages - The company has established a robust R&D and marketing framework, with significant investments in proprietary research and a strong marketing presence on platforms like Douyin [3][22]. - The company’s main brand, Han Shu, has positioned itself effectively in the market, leveraging high-quality, cost-effective products to capture consumer interest [35][42]. Profitability Forecast - The company forecasts revenues of 84.90 billion, 102.89 billion, and 123.07 billion for 2025, 2026, and 2027 respectively, with corresponding net profits of 10.04 billion, 12.50 billion, and 15.20 billion [4][5].