The Zhitong Finance App learned that Shen Wan Hongyuan released the 2024 Spring Cosmetics Medical and Aesthetic Industry Strategy Report stating that the Chinese beauty market has temporarily stopped growing rapidly in the past ten years and has entered a stage of steady development. The demand side of the market is stable. Domestic brands have ushered in an optimized competitive landscape due to their advantages of localized market insight, timely grasping the rising trend of efficacy, and rapid channel layout capabilities. Domestic brands have risen across the board. Over the past 24 years, the growth rate of key domestic brands has surpassed that of foreign brands. Optimistic about the market space and performance transformation of key domestic brands under the optimization of the competitive landscape.

Key recommendations: 1) Cosmetics: Shangmei Co., Ltd. (02145), Giant Biotech (02367), Pereyar (603605.SH), Marumi Co., Ltd. (603983.SH), Freda (600223.SH), Shuyang Co., Ltd. (300740.SZ); Recommended attention: Bethany (300957.SZ), Huaxi Biotech (), Shanghai Jiahua (Dubai). 688363.SH 600315.SH 2) Medical Aesthetics: Aimeike (300896.SZ), Huadong Pharmaceutical (000963.SZ), Haohai Biotech (688366.SH).

Shen Wan Hongyuan's main views are as follows:

Looking back at the cosmetics and aesthetic industry and companies: the beauty demand side recovered steadily, the beauty care sector surpassed the decline in 23, and welcomed a correction in valuation in 24

1) Recovery was weak after the epidemic in '23, and the zero growth rate of cosmetics companies was lower than market expectations throughout the year, triggering market pessimism such as weak demand. The SW Beauty Care Index fell by nearly 40% in '23.

2) Since the beginning of '24, the demand side has recovered steadily. In January-February, beauty salons had zero growth rate of 4%, and SW beauty care values have risen by about 10% since the rebound on February 6. It surpassed the decline in 23 and pulled back in 24. It is recommended to seize new investment opportunities.

Cosmetics: The market is steady, and domestic products are bucking the trend, and the growth rate has completely surpassed that of international brands

1) The beauty demand side recovered steadily in 24 years. In '24, the growth rate is expected to gradually increase in the following months as the base figure decreases, industry inventory clean-up, and residents' income expectations improve.

2) The domestic product concept continues to gain strength, and 38 major promotions have shown its strength. From January to February '24, the growth rate of domestic beauty brands on Taoxi and Douyin platforms surpassed that of foreign investment. With 38 major promotions, domestic products Perea and Han Shu reached the top of the Taoxi and Douyin beauty rankings.

3) International groups stalled in China, continued to free up market space, actively accepted domestic goods, and welcomed the optimization of the competitive landscape. The three major international beauty companies failed to outperform in the Chinese market in 23 years, and all dimensions stalled to free up market space, confirming the rise of domestic products.

4) Collagen/morning, C, and evening packs are popular. Domestic products have grasped recent consumer trends in various aspects such as marketing/ingredients/promotion forms, etc., and overtaking cars at corners has led to a high increase in employment performance.

Medicine and Aesthetics: Normalization of social networking combined with a recovery in residents' income expectations. Medical and aesthetic institutions and upstream pharmaceutical devices anticipate restorative growth in 24 years

Long-term worry-free demand side: increased penetration rate+increased national consumption capacity+domestic product substitution concept; short-term logic: 24 years will benefit from a recovery in economic expectations, stricter compliance, clear out “water goods” products, and focus consumption on strong leading brands. Supply side: Light medical and aesthetic projects with high viscosity, high frequency, and low unit price. The supply side is competing with thousands of sails. Aimeike's research pipeline is well planned. East China Pharmaceutical and Jiangsu Wuzhong have a cross-border layout. Haohai Biotech is seizing the high-end blue ocean of domestic products and striving for full line development. Juzi Biotech and Jinbo Biotech are adding color to the pharmaceutical device. Both supply-side and demand-side benefits have led to medical and aesthetic circuit attention and consumer preferences.

Risk warning: macroeconomic uncertainty; consumer spending intentions fall short of expectations; increased industry competition; third party data errors; declining traffic from superanchors.