Cathay Securities and Haitong Securities: The rise of domestic beauty and personal care brands accelerates, with selected products entering a growth cycle

According to the Zhitong Finance APP, Guotai Junan released a strategic research report stating that from January to April 2025, the cumulative year-on-year growth of cosmetics retail sales is +4%, underperforming the overall retail market by 0.7 percentage points, but narrowing compared to 2024. The industry is showing four core trends: innovation in personal care products, breakthroughs in ingredient technology, a rise in emotional consumption, and the continuation of affordable consumption. The firm recommends selectively investing in growth stocks that are in a product upcycle and paying attention to companies with marginal improvements. The beauty care sector has a clear trend of domestic brands rising, possessing strong new consumption leading attributes. Guotai Junan's main viewpoints are as follows: Investment Recommendations Recommended to increase holdings: 1) Personal care sector: High-quality companies benefiting from product innovation and opportunities in the Douyin channel are expected to see new growth, with key recommendations including RYC, Dencare, and Runben; 2) Beauty sector: Structural opportunities, with key recommendations for companies in the collagen restructuring dividend track such as Jinbo Biological, GIANT BIOGENE, and Marubi; Mao Geping, which has high-end scarcity and is currently in a brand momentum explosion period; Shangmei Co., Ltd. and Proya, which have a multi-brand matrix and are expected to benefit from the overall increase in domestic market share; 3) Companies expected to bottom out and potentially welcome a turning point include Lafang, Shuiyang, Betaini, Furida, Huaxi Biological, Fulejia, Meili Tianyuan Medical Health, and Qingsong. Industry: Stable Demand, Acceleration of Domestic Brands in Beauty and Personal Care From January to April 2025, the cumulative year-on-year growth of cosmetics retail sales is +4%, underperforming the overall retail market by 0.7 percentage points, and demand remains stable overall. Relying on product innovation and channel operation capabilities brought by organizational efficiency, leading domestic brands continue to perform well, while the rise of new domestic brands is spreading from beauty to personal care fields, with domestic market shares increasing in skincare, color cosmetics, baby products, oral care, and sanitary napkins. However, overall differentiation is intensifying, with brands in an upcycle maintaining rapid growth. Trends: Old Trees Sprouting New Buds, Accelerated Product Innovation Personal care transformation: New products in traditional personal care categories, with content e-commerce creating a new environment for product launches, helping new products gain traction. 2) Ingredient innovation: Continuous prosperity in collagen restructuring, with various types and structural innovations aiding the expansion of application scenarios. 3) Emotional consumption: Emotional value catalyzing demand for culture, style, and experience, with domestic trend color cosmetics and fragrance personal care expected to benefit. 4) Affordable consumption: The trend of cost-effectiveness continues under supply-demand resonance, with strong supply chains and well-operated brands expected to benefit. Key Companies: Select Growth, Focus on Improvement Looking ahead to 2025, market risk preferences are significantly recovering, with the beauty care sector undergoing many changes and an overall rising trend of domestic brands, showing clear growth attributes and leading new consumption. The differentiation of brands in the fundamental dimension is intensifying, with a focus on high-growth stocks driven by product innovation and attention to marginal improvements. Risk Warning Economic slowdown dragging down discretionary consumption; 2) Intensified brand competition; 3) New product promotion performance below expectations; 4) New brand incubation not meeting expectations