Huaxi Securities released a research report stating that Forest Cabin (02657) primarily focuses on the high-end anti-wrinkle and firming segment, having creatively introduced the "nourishing skin with oil" concept. The report is optimistic about the release of its brand value, expansion of product categories and sales channels, and optimization of operational efficiency. Coupled with the resource boost from its recent listing, the company is expected to further strengthen its leading position in the domestic high-end skincare market based on its existing advantages in the facial oil sector, thereby continuously expanding its market space. This is an initial coverage report with no rating assigned at this time. The main views of Huaxi Securities are as follows:
A leader in high-end domestic skincare, Forest Cabin pioneered the new "nourishing skin with oil" segment. Founded in 2003, the company initially focused on herbal handmade soaps. In 2014, it launched its first Camellia Flower Moisturizing Oil, creating the "nourishing skin with oil" category. The brand officially transitioned to a high-end skincare positioning in 2016. It has now established a closed-loop operation encompassing raw materials, R&D, production, and sales, becoming a representative brand for high-end domestic skincare. From 2022 to 2024, the company's revenue achieved a Compound Annual Growth Rate (CAGR) of 32.29%. After returning to profitability in 2023, its net profit has maintained rapid growth, driven by the volume increase of high-margin facial oil products and the realization of scale effects, which continue to propel strong growth in both revenue and profit.
The skincare market in China presents broad prospects for the high-end segment, with the facial oil market expanding rapidly. The skincare market exhibits a clear K-shaped divergence: growth in the mass market is sluggish, while the high-end market is rapidly expanding and still has significant room for penetration rate increases. According to data from CIC, the scale of China's high-end skincare market reached 114.4 billion yuan in 2024, with a CAGR of 8.84% from 2019 to 2024. The CAGR from 2024 to 2029 is projected to be 13.82%. The high-end market imposes higher requirements on R&D, supply chain, and brand power, making it difficult for small and medium-sized brands to enter in the short term, leading to relatively moderate competition. Furthermore, for domestic brands, there is extensive room for import substitution within the high-end market. As a sub-segment of skincare, the facial oil market has experienced significant growth. CIC data shows that the size of China's facial oil market reached 5.3 billion yuan in 2024, with a CAGR of 42.8% from 2019 to 2024. The CAGR from 2024 to 2029 is forecasted to be 21.3%. Facial oils offer benefits such as anti-wrinkle, firming, repair, and moisturizing effects, aligning perfectly with the concept and trend of "nourishing skin with oil." Combined with skincare brands' innovation and category expansion in oil-based products, domestic demand for facial oils is growing rapidly, significantly outpacing the overall skincare market and other skincare product categories.
Core strengths: Utilizing Eastern ingredients to break into the high-end skincare market and implementing an omni-channel strategy to strengthen brand perception. The company anchors itself in the high-end anti-wrinkle segment, successfully building the "Camellia Flower Facial Oil" hero product using the Chinese high-mountain red camellia as both a core ingredient and a cultural symbol, while solidifying quality and efficacy through full value chain integration. Concurrently, it has deployed an omni-channel Online-Merge-Offline (OMO) strategy to support brand expansion and user retention. Online, it reaches high-end consumer groups through precision marketing, while offline, it conveys its brand ethos via immersive counter experiences, achieving deep integration between online and offline scenarios to accurately capture the mindshare of high-end users. Leveraging this established user perception and the differentiated advantage of its core camellia ingredient, the company is further enriching its product pipeline, extending coverage to multiple categories of high-end skincare products, and continuously reinforcing its leading brand position in high-end skincare.
Investment recommendation: As Chinese consumers increasingly pursue high-quality lifestyles, the domestic high-end skincare market offers vast development prospects. Furthermore, sub-segments like anti-wrinkle/firming and facial oils are expanding at rates exceeding the industry average. Forest Cabin focuses on the high-end anti-wrinkle and firming segment and has creatively proposed the "nourishing skin with oil" concept. As the top-ranked domestic high-end skincare brand by retail sales in 2024 and the only domestic brand to rank among the top 15 in China's overall high-end skincare market, it has become a benchmark for high-end domestic skincare brands, demonstrating significant scarcity value. Huaxi Securities is optimistic about the release of its brand value, expansion of product categories and channels, and optimization of operational efficiency. Augmented by the resource support from its recent listing, the company is poised to further solidify its leading position in the domestic high-end skincare market, building upon its strengths in facial oils, and continuously unlock new market potential. This is an initial coverage report with no rating assigned.
Risk warnings: Consumer spending may fall short of expectations; industry competition could intensify; performance of new products might not meet targets; offline store expansion may proceed slower than planned.
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