As 80s-generation successor Hou Yameng steps to the forefront, Proya Cosmetics Co.,Ltd. (603605.SH) has failed to gain recognition in both consumer and capital markets.
Having just crossed the 10 billion yuan revenue threshold, domestic beauty giant Proya Cosmetics finds itself trapped in a low-growth predicament.
In the first half of this year, Proya's revenue and net profit growth rates dropped to 7.21% and 13.8% respectively, marking the lowest growth rates since its 2017 listing. In comparison, the same period last year saw growth rates of 37.9% and 40.48%.
Behind this performance deceleration lies a combination of unfavorable factors: weak sales of the main Proya brand, underperforming new brands, declining marketing effectiveness, light R&D investment, and executive departures amid second-generation succession.
Market consensus suggests that negative performance expectations have led to Proya's continuous stock price decline since 2023, with market capitalization evaporating by over 40% by the end of September this year. Mao Geping and Shanghai Jahwa, both smaller in scale than Proya, have now surpassed it in market value.
Proya has also decided to pursue a Hong Kong listing, aiming to become the first domestic beauty company with A+H dual listings. The company announced this plan in late August, stating its purpose is to accelerate internationalization strategy and overseas business development while enhancing financing capabilities.
**01 Performance Deceleration and Downward Expectations**
Hou Juncheng and his brother-in-law Fang Yuyou began representing domestic and international renowned daily chemical brands in the 1990s. After accumulating some capital, they founded Proya in 2006.
Skilled in marketing, Hou Juncheng and Fang Yuyou seized opportunities at different industry stages, enabling Proya's rapid rise.
In its early days, relying on lower-tier channels such as CS beauty chain stores and regional supermarkets, Proya quickly penetrated third-tier cities and below, filling channel gaps in the mass skincare market at that time.
As internet traffic dividends exploded, Proya pivoted online in time, using blockbuster marketing and big single-product strategies to break through in the fiercely competitive domestic skincare track, gradually growing into an industry leader.
By 2016, after ten years of operation, Proya achieved revenue of 1.623 billion yuan and net profit of 154 million yuan. The company owned multiple brand series including "Proya," "Usara," "Hanya," "Youya," "Cat Language Rose," and "Yuefuti," covering skincare, cosmetics, cleansing care, aromatherapy, and other beauty categories.
In November 2017, Proya listed on the Shanghai Stock Exchange main board. Over the following seven years, Proya entered a period of rapid development with revenue and net profit growth exceeding 20%.
In 2024, Proya achieved revenue of 10.778 billion yuan, becoming the first domestic beauty company to exceed 10 billion yuan in revenue, surpassing Shanghai Jahwa to claim the "top spot." According to the company's metrics, Proya outperformed international brands like P&G and Shiseido, ranking first in market share among domestic beauty brands.
However, Proya quickly fell into the "10 billion scale trap." Revenue growth in the first half of this year dropped below 10%, with second-quarter revenue and net profit growth falling to 6.49% and 2.36% respectively, the slowest pace in nearly eight years since listing.
In fact, Proya's growth has been continuously slowing since 2024, while industry peers maintain high growth rates.
In the first half of this year, Shanghai Jahwa recorded revenue of 4.108 billion yuan and net profit of 524 million yuan, with growth rates of 17.29% and 30.65% respectively. Mao Geping achieved revenue of 2.588 billion yuan and net profit of 670 million yuan, with growth rates of 31.3% and 36.1% respectively.
Wanlian Securities downgraded Proya's profit forecasts, projecting net profit attributable to shareholders of 1.784/2.03/2.288 billion yuan for 2025-2027, down from previous projections of 1.853/2.171/2.516 billion yuan.
Dongwu Securities followed suit, reducing Proya's 2025-2027 net profit forecasts from 1.86/2.16/2.48 billion yuan to 1.8/2.05/2.32 billion yuan.
**02 Main Brand Weakness and Marketing Strategy Failure**
Proya's brand portfolio includes Proya, Caitang, Off&Relax, Yuefuti, CORRECTORS, and INSBAHA, covering mass premium skincare, cosmetics, personal care, and high-efficacy skincare segments.
Regarding the declining growth rate, Proya explained that the main reasons were year-over-year decreases in both sales volume and unit prices for skincare products (including cleansing) and unit price declines for beauty cosmetics.
In the second quarter, Proya's skincare (including cleansing) product sales volume was 30.7762 million units, down 0.2% year-over-year, with an average selling price of 75.7 yuan per unit, down 1.37% year-over-year. Beauty cosmetics sales volume was 5.0909 million units, up 40.9% year-over-year, but the unit price of 90.69 yuan dropped 8.14% year-over-year.
The core issue behind slowing performance growth is the weakening development of the main Proya brand.
Nearly 20 years after its establishment, Proya derives over 70% of its revenue from the main brand. In 2018, the main brand accounted for 88.7% of total revenue, declining to 79.6% in 2024 and further to 74.27% in the first half of this year. From 2018 to 2024, main brand revenue grew from 2.09 billion yuan to 8.58 billion yuan, with a compound annual growth rate of 26.5%, but annual revenue growth rates declined from 37.46% to 19.55%.
In the first half of this year, Proya's main brand revenue was 3.979 billion yuan, down 0.08% year-over-year, marking the first decline in nearly five years.
The market is concerned this signals declining competitiveness of the main brand and that flagship product series like Ruby Cream and Early C Late A face growth ceilings. Some analysts suggest that Proya's main brand anti-aging product lines (such as Ruby Essence) have achieved market penetration rates exceeding 60%, with diminishing marginal effects from the "big single-product strategy."
In the first half, the number of customers on Proya's Tmall flagship store decreased 11.78% year-over-year, while customers on Vipshop declined 15.63%.
Proya's management responded that the two major product series are currently entering a stable phase, and growth deceleration is an objective phenomenon. While revenue has temporarily declined, this does not represent a long-term ceiling.
Beyond the main brand, Proya has yet to cultivate a second brand capable of supporting half the business.
In recent years, Proya has successively acquired cosmetics brand Caitang, Spanish brand Sante Goland, personal care brand Off&Relax, and high-efficacy skincare brand CORRECTORS, while expanding into medical devices with medical dressings.
Highly anticipated "Caitang" achieved revenue of 705 million yuan in the first half, accounting for 13.17% of total revenue. From 2021 to 2023, this brand maintained annual revenue growth above 75%, but 2024 revenue growth dropped to 19.04%. In the first half of this year, Caitang's revenue growth was 21.11%, about half the rate of the same period in 2024.
Personal care brand Off&Relax revenue grew from 130 million yuan in 2022 to 370 million yuan in 2024, with a compound annual growth rate of 70.9%, accounting for 3.42% of 2024 revenue and increasing to 5.22% in the first half of this year.
These new brands remain small in scale, unable to offset the impact of main brand revenue decline.
Coming from an agency background, Proya has always excelled at marketing. From 2018 to 2024, the company's sales expenses soared from 636 million yuan to 5.161 billion yuan, rising from 37.53% to 47.88% of total revenue. In the first half of this year, sales expenses reached 2.659 billion yuan, increasing to 49.59% of revenue.
Image promotion and advertising expenses account for over 90% of sales expenses.
Proya has long maintained a celebrity endorsement strategy, from Sun Li to Fan Chengcheng and Zhang Ruonan. In the first half of this year, the company signed three top-tier artists: Liu Yifei, Yi Yang Qianxi, and Song Jia, directly causing image promotion expenses to surge to 44.05% of revenue.
Despite continuously increasing sales expenses, effectiveness has begun to weaken, especially online.
Proya grew through e-commerce. From 2018 to 2020, the company's management team frequently traveled to Guangzhou to learn from emerging companies, personally studying everything from graphic design and copywriting to placement strategies and operational logic. Meanwhile, they rebuilt the e-commerce team, with top leadership personally reassuring offline agents and convincing them to follow the brand's online promotional rhythm.
In just two years, Proya's online channel revenue share increased from over 40% to 70%. In 2024, online channels accounted for 95.1%, rising to 95.39% in the first half of this year.
As traffic dividends faded and platform commissions increased, Proya fell into "marketing dependency," but the "money for growth" model's effectiveness has significantly diminished.
Facing pressure, Proya restarted offline channels in 2023, entering supermarkets and department stores with limited success. In 2024, offline revenue was 616 million yuan, up 7.35% year-over-year, but dropped 21.49% to 247 million yuan in the first half of this year.
**03 Bottom-tier R&D Investment Hampers Technical Barriers**
For years, Proya's R&D investment has ranked at the industry bottom.
From 2018 to 2024 and the first half of this year, Proya's R&D investment ratios were 2.16%, 2.4%, 1.92%, 1.66%, 2%, 1.95%, 1.95%, and 1.77% respectively.
Roughly calculated, Proya's cumulative R&D investment since 2018 totaled 882 million yuan, less than the 886 million yuan in sales expenses for 2018 alone.
In 2024 and the first half of this year, Huaxi Biology's R&D investments were 466 million yuan and 231 million yuan, accounting for 8.7% and 10.22% respectively. Beiersdorf's R&D investments were 337 million yuan and 116 million yuan, accounting for 5.87% and 4.91% respectively. Shanghai Jahwa's R&D expenses were 180 million yuan and 103 million yuan, accounting for 2.65% and 2.51% respectively. Perfect Biology's R&D expense ratios were 2.48% and 2.3% respectively. Lafang's R&D expense ratios were 4.68% and 3.68% respectively.
In early 2024, Fang Yuyou stated, "Proya indeed originated from channels and marketing. We haven't yet become the ideal technology-driven enterprise, but we're working toward that goal."
The R&D investment gap directly reflects in product competitiveness. Estée Lauder owns "Lipo-Peptide" exclusive to its "Little Brown Bottle," while L'Oréal possesses "Proxylane" in its "Black Bandage." These "patented ingredients" not only provide strong efficacy support but also build technical barriers.
Although Proya has launched hit products like "Double Anti-Aging Essence" and "Ruby Cream," core ingredients are mostly purchased externally, lacking "patented ingredients."
**04 Veterans Depart as Successor Lacks Market Recognition**
After breaking through 10 billion yuan in revenue scale, Proya's second-generation succession has moved to the forefront.
Proya's actual controller Hou Juncheng was born in December 1964, now 61 years old. His son Hou Yameng was born in 1988, joined Proya's e-commerce department in 2014, and has served as director and deputy general manager since September 2021.
In September 2024, Fang Yuyou stepped down as director and general manager of Proya, with Hou Yameng taking over. Simultaneously, the company's internal organizational structure was adjusted, with some middle and senior management personnel and ordinary employees departing.
Core executives are experiencing a departure wave. In January 2024, Chief Marketing Officer Ye Wei, who led the "Early C Late A" concept, confirmed his departure. In July, Chief Science Officer Wei Xiaolan left, having previously led Proya's global R&D system construction. Additionally, former R&D Director Jiang Ligang also jumped to Pechoin.
In May this year, Wang Li, Proya's first CFO since listing and former deputy general manager and board secretary, resigned. Before and after her departure, Wang Li sold over 100,000 shares of Proya, cashing out nearly 10 million yuan, with remaining holdings of 177,651 shares.
As veterans leave, new talent enters. Hou Yameng places greater emphasis on executives with international backgrounds.
Proya has successively appointed Chief R&D Innovation Officer Sun Peiwen, Chief Digital Officer Hu Ningbo, and Chief Science Officer Huang Hu. Huang Hu previously served as Chief Scientist at P&G's Global R&D Headquarters.
In August this year, Proya announced the appointment of Xue Xia as board secretary. The company believes that Xue Xia, who previously worked at Red Dragonfly and Luolai Lifestyle, will inject key momentum into Proya's Hong Kong listing push with her multinational enterprise management experience. In September, Proya welcomed new Chief Marketing Officer Guo Xiao, who previously served in marketing roles at AFU Essential Oils, Pop Mart, and Beneunder.
Proya's current management team consists of 9 people, with an average tenure of 4.22 years and an average age of 46. Some analysts point out that management rejuvenation is a trend, but strategic wavering and execution disconnection have already affected market confidence.
Upon announcing the Hong Kong listing, Proya launched its highest-ever interim dividend plan: 0.8 yuan cash dividend per 10 shares (including tax), with total cash dividends expected to reach 315 million yuan (including tax), accounting for nearly 40% of first-half net profit attributable to shareholders.
Hou Juncheng, holding 34.5% directly, and Fang Yuyou, holding 15.1%, will receive at least 100 million yuan and 48 million yuan respectively.
Since listing, Proya has achieved cumulative net profit of 6.295 billion yuan and completed 10 dividend distributions, with cumulative cash dividends of 2.125 billion yuan, representing a dividend ratio of 33.77%. Hou Juncheng, Fang Yuyou, and others have collectively received over 1 billion yuan in cash dividends.
Additionally, since late 2020, Fang Yuyou has conducted over 60 share reductions, cashing out over 3.5 billion yuan, with his shareholding ratio declining from 24.43% to 15.3%. Hou Juncheng and Fang Aiqin have also made multiple reductions, cashing out approximately 200 million yuan combined.
Proya is not short of funds. Since listing, Proya has raised a cumulative 4.258 billion yuan on A-shares, including 1.519 billion yuan through direct financing via IPO issuance and convertible bonds.
As of the end of June this year, Proya held 4.633 billion yuan in monetary funds, with total liabilities of 2.447 billion yuan and current liabilities of 1.587 billion yuan. In 2024 and the first half of this year, the company's asset-liability ratios were 27.14% and 29.55% respectively.
This year, Proya's stock price has cumulatively declined nearly 4%, underperforming the broader market by nearly 18 percentage points.
Institutional funds are accelerating their exodus from Proya. In 2024, institutions among Proya's top ten tradable shareholders reduced holdings by over 13.35 million shares. In the first half of this year, institutions continued reducing Proya holdings by over 15 million shares.
Data shows that in 2022, 2024, and the first half of this year, shareholding ratios of institutions including social security funds and Stock Connect were 36%, 31%, 28%, and 23% respectively.
Proya remains the highest market cap beauty stock on A-shares at approximately 32 billion yuan with a dynamic PE of about 19.8, but this is now significantly lower than Hong Kong-listed Mao Geping and Shanghai Jahwa.
Shanghai Jahwa listed on the Hong Kong Stock Exchange main board on December 22, 2022. As of September 26 this year, its stock price has cumulatively risen 292%, with a market value of 39.3 billion Hong Kong dollars and PE of 40.18.
Mao Geping listed on the Hong Kong Stock Exchange main board on December 10, 2024, with its stock price reaching 107.3 Hong Kong dollars per share. As of September 26, its market value was 51.4 billion Hong Kong dollars with a PE of 45.89.
In April this year, Hou Yameng proposed the "Double Ten Strategy," aiming to build Proya into a top-ten global cosmetics company within the next decade. Clearly, with home market performance growth stalling, the successor's dream has yet to gain investor recognition.
Comments