Investment Rating - The report maintains a "Buy" rating for the cosmetics and medical beauty sector, highlighting strong growth potential and investment opportunities in the industry [14][19]. Core Insights - The cosmetics and medical beauty sector has shown resilience, outperforming the market during the week of August 29 to September 5, 2025, with the Shenwan Beauty Care Index declining only 0.8% [3][4]. - The transition to autumn skincare marks the beginning of a consumption peak for the sector, with significant sales events such as the Autumn Beauty Consumption Festival and Double 11 approaching, creating new investment opportunities [9][10]. - Major companies in the sector are optimistic about their performance in the second half of 2025, as indicated by a recent conference involving over ten beauty care companies [9]. Summary by Sections Industry Performance - The Shenwan Cosmetics Index remained stable, outperforming the Shenwan A Index by 1.4 percentage points, while the Shenwan Personal Care Index fell by 1.8%, underperforming the Shenwan A Index by 0.3 percentage points [3][4]. Key Company Reviews - **Mao Geping (1318HK)**: Reported a revenue of 2.59 billion yuan for H1 2025, a year-on-year increase of 31%, with a net profit of 670 million yuan, up 36%. The color cosmetics segment saw a revenue of 1.42 billion yuan, while skincare generated 1.09 billion yuan, reflecting strong brand momentum [10][11]. - **Shangmei Co. (02145HK)**: Achieved a revenue of 4.108 billion yuan in H1 2025, a 17.3% increase, with a net profit of 556 million yuan, up 34.7%. The main brand, Han Shu, contributed significantly to growth, with a revenue of 3.344 billion yuan [16][17]. Investment Recommendations - Recommended companies include Shangmei Co., Porlaia, and Shanghai Jahwa, which have strong brand matrices and relatively low PE multiples. Other notable mentions are Marubi Biological and Mao Geping, which are positioned well to benefit from the rise of domestic beauty brands [10][19]. - The report suggests focusing on companies with strong R&D capabilities and product pipelines, particularly in the upstream medical beauty segment, with a recommendation for Aimeike [10][19]. Market Trends - The report notes a significant increase in online sales, with H1 2025 online revenue for Mao Geping reaching 1.297 billion yuan, a 39% year-on-year increase, marking a shift in consumer purchasing behavior towards online platforms [12][18]. - The overall cosmetics retail market showed a 4.5% growth in July 2025, indicating a robust recovery in consumer spending [23][26]. Strategic Developments - Porlaia's investment in Huazhi Xiao reflects a strategic move to enhance its multi-brand strategy and capitalize on the influence of Gen Z consumers [28]. - The report highlights the competitive landscape, noting that domestic brands are increasingly capturing market share, with a notable shift in consumer perception from "value for money" to "quality choice" [32].

Core Insights - A-share mid-year report shows revenue and net profit growth remains positive, but the proportion of loss-making stocks is still high [2][10] - The overseas revenue share of A-shares reached a record high of 13.4% in 2025, indicating a trend towards internationalization [10] - The pet food industry is experiencing a trend towards "micro-innovation" and "precision nutrition," with a focus on premium products [3][16] A-share Market Analysis - A-share revenue growth peaked in Q1 2021 at 44.8% and has been on a downward trend for 14 consecutive quarters, with a slight recovery in 2025 [10] - The proportion of loss-making companies in A-shares reached 29.4% in Q2 2025, the highest since 2008 [10] - The profitability of the main board is under pressure, while the Sci-Tech Innovation Board is showing signs of recovery [10] Pet Food Industry Insights - The 27th Asia Pet Expo in 2025 saw a record number of exhibitors but a decline in the number of participating brands, indicating increased industry concentration [12][3] - Major brands like Guibao Pet and Zhongchong Co. are focusing on product upgrades and expanding their market presence [3][12] - The trend of "small dog economy" is rising, with leading brands increasing their focus on dog food products [16] Financial Performance of Key Companies - The report highlights that companies like Boss Electric and Wanhe Electric are maintaining stable profitability despite market challenges [22][24] - The pet food sector is seeing significant product innovation, with brands launching new premium products to cater to evolving consumer preferences [3][16] - The overall cash flow and operating cash return in A-shares have improved, indicating better financial health among companies [13]

Core Viewpoint - The company demonstrated strong financial performance in H1 2025, with significant revenue growth and profitability, while also focusing on brand expansion and global market penetration [1][2][3][4] Financial Performance - In H1 2025, the company achieved revenue of 4.108 billion yuan, a year-on-year increase of 17.3%, and a net profit of 556 million yuan, up 34.7% [1] - The gross margin stood at 75.5%, with a slight decline of 1 percentage point year-on-year, while the net profit margin increased by 1.75 percentage points to 13.5% [1] - The company proposed a cash dividend of 1.99 billion yuan, with a payout ratio of approximately 38% [1] Brand Performance - The main brand, Han Shu, generated revenue of 3.344 billion yuan in H1 2025, a 14.3% increase, accounting for 81.4% of total revenue [2] - The emerging brand, Newpage, saw revenue growth of 146.5% to 397 million yuan, becoming a key growth driver in the infant and child sector [2] - The company is undergoing brand adjustments, with One Leaf and Red Elephant experiencing revenue declines of 29.0% and 8.7% respectively, indicating early signs of strategic transformation [2] Channel Strategy - Online sales reached 3.809 billion yuan in H1 2025, a 20.1% increase, representing 92.7% of total revenue, driven by strong performance on platforms like Douyin [2] - Offline sales decreased by 10.6% to 269 million yuan, with plans for strategic transformation to enhance offline growth [2] Strategic Initiatives - The company is implementing a "single focus, multi-brand, globalization" strategy, with plans to launch three new brands in 2025 and expand into Southeast Asia, North America, and Europe [3][4] - The company aims to achieve a revenue target of 30 billion yuan by 2030, supported by a clear path for multi-category and multi-track expansion [3] Research and Development - The company is increasing R&D investment, with a R&D expense ratio of 2.5% in H1 2025, and has filed 27 new patents during the period [1][4] - The focus on R&D is expected to strengthen technological barriers and enhance product offerings [1][4]