8 October 2025 | 9:47PM HKT Equity Research China Cosmetics: Double 11 pulse check: Expert call takeaways: Longest ever with step up promotion from Tmall/Taobao; MGP/Jahwa to lead On Oct 8, we invited a cosmetics expert specializing in providing e-com solutions for beauty brands in China to share some of the latest updates on the industry, especially the Double 11 Shopping Festival that starts from Oct 9 til Nov 14 which could account for 60%+ of 4Q online GMV or 20% of full year per historical average. We ...

Market Trends & Consumer Behavior - The beauty industry is undergoing a marketing shift to target a younger, online-savvy audience, with teens frequenting beauty stores and influencers driving trends [1] - Teen spending on beauty products is increasing, with Gen Z spending 10% more on skincare, averaging $2,000 per year [2] - Skincare dominates the market with $167 billion in market share, while makeup generates $82 billion [2] - Social media influencers and celebrities are leveraging their platforms to capitalize on beauty trends [2][3][4] Brand Strategies & Collaborations - Newer brands are surpassing established brands, driven by celebrities like Rihanna, Selena Gomez, and Haley Bieber who create viral trends on TikTok [5] - Sephora has launched an influencer-focused platform called Sephora storefront, enabling creators to share recommendations and earn commissions [6] - Beauty brands are exploring unexpected sponsorships, such as Charlotte Tilbury partnering with the Formula 1 Academy and E L F Cosmetics sponsoring Indy500 [8] - Some brands are using nostalgia to attract customers, appealing to established fandoms [9] Challenges & Opportunities - OG (Original Gangster) brands face increased competition in an oversaturated market, needing to compete for viral moments on platforms like TikTok [11] - Cosmetic companies are adapting to evolving trends, with some collaborations being perceived as gimmicky [10] - Sephora is expanding its partnerships beyond traditional beauty, venturing into sports like WNBA and women's basketball [7]

Core Insights - Kolmar Korea collaborates with Amazon to create a strategic roadmap for the global expansion of K-Beauty, emphasizing technological expertise as a key competitive advantage [1][5][8] Group 1: Event Overview - Kolmar Korea served as the exclusive manufacturing sponsor for Amazon Beauty in Seoul 2025, which took place on September 19, attracting over 3,000 attendees from the beauty industry [3][7] - The event featured notable speakers, including Sang-Hyun Yoon, Vice Chairman of Kolmar Group, who delivered a keynote address on K-Beauty's success from a manufacturer's perspective [3][4] Group 2: Key Messages from Leadership - Vice Chairman Yoon highlighted the necessity of evolution and innovation for brands to avoid obsolescence, stressing that the competitive nature of the Korean market has laid the foundation for K-Beauty's global success [4][5] - Yoon also pointed out that understanding consumer needs and expanding product offerings are crucial for achieving international success [4] Group 3: Company Initiatives - Kolmar Korea showcased a variety of solutions in skincare, makeup, personal care, sun care, and cosmetic packaging at the event, providing tailored consultations to potential business partners [4][5] - The company aims to support clients' global market expansion through its ongoing partnership with Amazon, reinforcing the importance of ODM companies in the sustainable growth of K-Beauty [5][6] Group 4: Company Background - Founded in 1990, Kolmar Korea is a leader in the cosmetics, pharmaceuticals, and health supplements sectors, specializing in ODM solutions and offering end-to-end services from formulation to finished product [6]

Core Insights - Ulta Beauty, Inc. is valued at a market cap of $24 billion and operates as a specialty beauty retailer offering a wide range of beauty products [1] - The company is classified as a large-cap stock, leveraging data-driven loyalty programs to enhance customer engagement and maintain its market leadership [2] Financial Performance - In Q2, Ulta reported revenue of $2.8 billion and earnings of $5.78 per share, exceeding consensus estimates [5] - Year-over-year, revenue improved by 9.3% due to increased comparable sales, the acquisition of Space NK, and new store contributions, while EPS grew by 9.1% [5] - Following the Q2 results, Ulta raised its fiscal 2025 guidance, expecting revenue between $12 billion and $12.1 billion and EPS in the range of $23.85 to $24.30 [5] Stock Performance - Ulta's shares have gained 13% over the past three months, underperforming the Nasdaq Composite's 15% return [3] - Over the past 52 weeks, Ulta's stock has rallied 32.8%, outperforming the Nasdaq's 27.9% increase [4] - Year-to-date, Ulta's shares are up 23%, compared to the Nasdaq's 16.4% rise [4] - Despite strong Q2 performance, shares fell 7.1% in the following trading session due to broader market headwinds [5] Market Position - Ulta maintains its leadership in the U.S. specialty beauty retail market through effective customer engagement strategies [2]

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Core Insights - The beauty industry is experiencing volatility, with major companies like Coty and Ulta Beauty facing challenges, while e.l.f. Beauty has shown significant growth [1][2] Company Overview - E.l.f. Beauty, based in California, offers a variety of affordable cosmetics and skincare products globally, with a market cap of $7.9 billion [4] Stock Performance - E.l.f. Beauty's stock price has doubled in the past six months, rebounding 176% from a 52-week low of $49.4, resulting in a 9.7% year-to-date gain [2][5] Sales and Growth - In Q1 FY2026, e.l.f. Beauty reported a 9% year-over-year increase in net sales to $353.7 million, driven by strong U.S. retail and e-commerce performance [7] E-commerce Contribution - E-commerce now represents approximately 20% of total sales for e.l.f. Beauty, with a growth rate of around 20% in the latest quarter, although this is a slowdown from the previous year's 50% growth [7] Valuation Concerns - Following its stock surge, e.l.f. Beauty is trading at 38 times forward earnings, significantly higher than the sector median of 17 times, indicating potential overvaluation [6]

Summary of Mao Geping Cosmetics Co. (1318.HK) Earnings Review Company Overview - **Company**: Mao Geping Cosmetics Co. - **Ticker**: 1318.HK - **Industry**: Cosmetics Key Points FY25 Guidance and Financial Outlook 1. **Sales and Net Income Guidance**: Management reiterated FY25 sales guidance of RMB5 billion, reflecting a 30% year-over-year growth, and slightly increased net income guidance to RMB1.2 billion from RMB1.18 billion, indicating improved return on investment due to brand investments [1][18] 2. **2H25 Performance Expectation**: The company expects 2H25 performance to be similar to 1H25, maintaining a net income year-over-year growth of approximately 36% [1][18] Product Pipeline and Category Progress 3. **Color Cosmetics**: Management sees significant potential across various product lines, with plans to launch new SKUs starting with blush, followed by lip and eye products [2][21] 4. **Skincare**: A new skincare line is showing early success, with plans to expand the range in 2H25 to meet diverse skin needs [2][21] 5. **Fragrance**: The roadmap includes advanced iterations of fragrances tailored to different environments and emotional moods, with profitability expected to improve in 2H25 [2][22] Channel Strategy and Execution 6. **Online Sales Growth**: Online channels, particularly Douyin and Tmall, saw significant growth of 44% and 31% year-over-year respectively in 1H25, with a focus on ROI and avoiding over-reliance on top KOLs [3][28] 7. **Offline Sales Performance**: Sales per store increased from RMB2.4 million to RMB2.9 million in 1H25, driven by a higher mix of new customers and improved repurchase rates [3][28] 8. **Store Expansion Plans**: The company aims to reach a target of 600 stores with approximately 30 net openings per year [3][28] Overseas Expansion 9. **International Market Entry**: The first store outside Mainland China is set to open in Hong Kong's Harbour City in 2H25, with future plans for expansion into Singapore, Japan, and South Korea [4][15][28] Financial Metrics and Valuation 10. **Key Financial Data**: - **Enterprise Value**: HK$42.2 billion - **Market Cap**: HK$46.1 billion - **Revenue Forecasts**: Expected revenue for FY25 is RMB5.1 billion, with a net income of RMB1.2 billion, reflecting a 32% and 36% year-over-year growth respectively [5][17] 11. **Earnings Revisions**: The earnings forecast for 2025-27 has been revised up by 2-3% due to improved profitability, despite slightly weaker sales and gross profit margin contraction [17][26] Risks and Considerations 12. **Key Risks**: Potential risks include the pace of beauty consumption penetration in China, online sales growth, new product development, and the effectiveness of ROI strategies in expanding the consumer base [27][32] Dividend Policy 13. **Dividend Payout Ratio**: Management has set a base dividend payout ratio of 30% [25] Analyst Rating 14. **Current Rating**: The stock maintains a Neutral rating, with a target price of HKD89, reflecting a 29x target average P/E against expected net income growth [16][30] This summary encapsulates the key insights from the earnings review of Mao Geping Cosmetics Co., highlighting the company's growth strategies, financial outlook, and market positioning within the cosmetics industry.

Summary of Mao Geping Cosmetics Co. (1318.HK) Conference Call Company Overview - **Company**: Mao Geping Cosmetics Co. (1318.HK) - **Period**: 1H25 (First Half of 2025) Key Financial Metrics - **Sales**: RMB 2,588 million, up 31% year-over-year (yoy) [1][3] - **Net Income (NI)**: RMB 670 million, up 36% yoy [1][3] - **Operating Profit (OP)**: RMB 873 million, up 45% yoy [1][3] - **Gross Margin**: 84.2%, down 0.7 percentage points (ppt) yoy [10][12] - **Net Margin**: 25.9%, up 0.9 ppt yoy [13] Sales Performance By Channel - **Online Sales**: RMB 1,297 million, up 39% yoy, but 6% below Goldman Sachs estimates (GSe) [9][4] - **Offline Sales**: RMB 1,224 million, up 27% yoy, exceeding GSe by 3% [7][4] By Category - **Color Cosmetics**: RMB 1,422 million, up 31% yoy, contributing 55% of total sales [4][1] - **Skincare**: RMB 1,087 million, up 33% yoy, contributing 42% of total sales [4][1] - **Fragrance**: RMB 11 million in sales [4][1] Operating Efficiency - **Selling and Distribution Expenses**: Increased by 24.8% yoy to RMB 1,169 million, but 9% lower than GSe [11][12] - **Selling Expenses Ratio**: Declined by 2.4 ppt yoy to 45.2%, significantly below GSe of 48.8% [11][12] Future Outlook and Strategies - **Discussion Points for Upcoming Briefing**: 1. Sustainability of 1H margin and details behind selling expenses ratio decline [2] 2. Full year 2025 outlook [2] 3. Strategies for Double 11 sales event [2] 4. Skincare category strategy and online channel expansion [2] 5. Updates on fragrance line performance and new product pipelines [2] Risks and Considerations - **Key Risks**: 1. Variability in beauty consumption penetration in China [18] 2. Online penetration rates [18] 3. Development of new star SKUs, especially in skincare [18] 4. ROI on expanding consumer base [18] 5. Key person risk [18] Valuation and Price Target - **12-Month Price Target**: HK$ 86, based on a 25x 2027E P/E [17] - **Current Price**: HK$ 96.45, indicating a downside potential of 10.8% [20] Conclusion Mao Geping Cosmetics Co. has shown strong growth in sales and net income for 1H25, driven by both online and offline channels. The company is focusing on operational efficiency and has plans for future growth, particularly in the skincare category and online expansion. However, it faces risks related to market penetration and product development. The current valuation suggests a potential downside, warranting careful consideration for investors.

Core Viewpoint - Ulta Beauty Inc. is entering its second-quarter earnings report with strong sales momentum and international expansion plans, despite facing margin pressures and changing consumer spending patterns [1]. Financial Performance - The company is expected to report second-quarter fiscal 2025 results on August 28, with earnings projected at $5.07 per share, an increase from the previous estimate of $4.87 but down from $5.30 a year ago [3]. - Revenue is forecasted to rise by 4.7% year-over-year to $2.67 billion, slightly above consensus estimates of $2.66 billion [4]. - Gross margins are anticipated to narrow by 20 basis points to 38.1%, while operating margins are expected to contract by 160 basis points to 11.3% [4]. Analyst Ratings and Forecasts - Telsey Advisory Group analyst Dana Telsey raised her price forecast for Ulta to $590 from $520, reflecting a 21.4x multiple on forward earnings, which is above recent trading levels but below Ulta's 10-year average [2]. - For fiscal 2025, Ulta reaffirmed guidance with sales expected between $11.5 billion and $11.7 billion and earnings per share between $22.65 and $23.30, while Telsey raised her EPS estimate to $23.45 [6]. Strategic Developments - Recent corporate updates include the planned conclusion of Ulta's Target shop-in-shop program in 2026, the acquisition of U.K.-based retailer Space NK, and international expansion initiatives in Mexico and the Middle East [5]. - Leadership changes are ongoing under new CEO Kecia Steelman, who took over in June following the departure of CFO Paula Oyibo [5]. Market Sentiment - Analysts from JPMorgan, Barclays, Oppenheimer, Canaccord, and DA Davidson have raised their price forecasts for Ulta, reflecting optimism despite margin challenges [8]. - Telsey highlighted consumer spending trends as a significant risk for the latter half of the year, with fragrance being a standout category while skincare, wellness, and makeup show mixed performance [7].

Summary of Mao Geping Cosmetics Co. (1318.HK) Conference Call Company Overview - **Company**: Mao Geping Cosmetics Co. (1318.HK) - **Market Cap**: HK$48.1 billion / $6.1 billion - **Current Price**: HK$98.15 - **12-Month Price Target**: HK$86.00, indicating a downside of 12.4% [9] Key Financial Highlights - **1H25 Profit Alert**: - **Net Income (NI)**: Expected to be between RMB665-675 million, representing a year-over-year increase of 35-37%, with a midpoint of RMB670 million, up 36% year-over-year, aligning with Goldman Sachs estimates of RMB666 million [1] - **Sales**: Expected to be between RMB2,570-2,600 million, reflecting a year-over-year growth of 30-32%, which is weaker than Goldman Sachs' estimate of RMB2,647 million at 34% year-over-year growth [1] - **Net Profit Margin (NPM)**: Expected to expand by 0.9-1.0 percentage points to 25.9%-26.0%, above Goldman Sachs' estimate of 25.1% [1] Market Concerns - **Sales Performance**: The weaker sales in 1H25 may indicate slower than expected growth in the skincare segment, which could impact the company's structural upside, as the color makeup business has limited growth potential [2] - **Brand Recognition**: Despite concerns, the market acknowledges MGP's niche brand premium, evidenced by better-than-expected NPM and healthy offline growth estimated at over 20% due to accelerated store expansion in high-end commercial districts in Tier 1 cities [2] Focus Areas for Upcoming Results - **Sales and Margin Details**: Breakdown of sales growth by skincare and color cosmetics, as well as online versus offline performance [3] - **2025 Outlook**: Expectations for the full year 2025 [3] - **Double 11 Strategies**: Plans regarding discounts, product offerings, channels, and KOL collaborations [3] - **Skincare Strategy**: Expansion plans for the skincare category and online channels [3] - **Fragrance Line Performance**: Updates on the performance of the fragrance line and new product pipelines [3] Investment Rating - **Current Rating**: Neutral [4] Valuation Methodology - **Target Price Methodology**: Based on a 25x 2027E PE, discounted back to mid-2026E at an 8.9% cost of equity [5] Risks and Considerations - **Key Risks**: - Variability in beauty consumption penetration in China - Online penetration rates - Development of new star SKUs, particularly in skincare - ROI on expanding consumer base into higher-tier markets and online channels - Key person risk [8] Financial Projections - **Revenue Forecasts**: - 2024: RMB3,884.7 million - 2025E: RMB5,136.9 million - 2026E: RMB6,524.6 million - 2027E: RMB7,925.4 million [9] Conclusion Mao Geping Cosmetics Co. is facing challenges with weaker sales in the first half of 2025, raising concerns about growth in the skincare segment. However, the company maintains a strong net profit margin and brand recognition. The upcoming results will be critical in assessing the company's strategies and outlook for the remainder of the year.