Huayuan Securities: Cosmetics Sector Shows Steady Performance in 26Q1, Highlighting Competitive Edge of Quality Domestic Brands

Huayuan Securities released a research report stating that leading domestic companies are expected to maintain strong leadership by leveraging their advantages in branding, products, channels, and management. The firm remains optimistic about the high growth potential of quality players in the beauty and personal care sector. Recommendations include: 1) Companies with strong brand momentum: MAO GEPING (01318), a leading high-end domestic cosmetics brand that continues to expand its product and channel reach; Ruoyuchen (003010.SZ), whose own-brand sales are growing rapidly while expanding into skincare brand development. 2) Companies benefiting from budget-friendly consumption trends: CHICMAX (02145), achieving synergistic growth across multiple categories and channels with sales exceeding expectations despite a high base; Runben Co., Ltd. (603193.SH), a quality domestic brand in mosquito repellent and baby care segments with strong operational performance and clear growth prospects in products and channels. Huayuan Securities' key views are as follows:

The cosmetics market demonstrated stable performance in 2025 and 26Q1. In 2025, retail sales of cosmetics by above-quota enterprises in China increased by 5.1% year-on-year, outpacing the 3.7% growth in total consumer goods retail sales, indicating overall steady performance. Monthly trends in 2025 showed growth rates generally between 7%-12% from March to May and September to December, with October single-month retail sales exceeding 52.2 billion yuan, setting a new high for the year and suggesting holiday periods may boost cosmetics consumption. Domestic brands contributed 57% of market share in 2025, with online channels accounting for over 65%. International brands strategically contracted, while domestic players broke through in niche segments. Platform dynamics gradually diverged, with Taotian engaged in存量 competition, JD.com showing steady growth, and Douyin dominated by domestic brands. Consumption displayed polarization between mass-market affordability and premium upgrades, with efficacy and cost-performance ratio becoming core consumer concerns. Overall, cosmetics demand remained stable in 2025 and 26Q1.

Accelerated premiumization of domestic cosmetics brands saw consumer preference for domestic high-end brands surpass European and American brands for the first time in 2025. According to Qingyan Intelligence's "China High-End Cosmetics Market and Consumer Trends Insight Report," China's high-end cosmetics market is projected to reach 242.9 billion yuan in 2026, up 2.23% year-on-year, with a CAGR of about 2% from 2024 to 2027. While foreign brands dominate the high-end market, structural changes are significant. From 2021 to 2025, consumer preference for domestic high-end brands rose from 28.4% to 46.5%, exceeding that for European and American brands for the first time in 2025. Domestic cosmetics brands may capture substantial growth opportunities in the high-end market through deep research on local consumer skin types and cost-effective products.

The beauty and personal care sector showed modest overall performance in 26Q1, with personal care sub-segments performing better. In 26Q1 (excluding Hong Kong stocks), the sector achieved revenue/net profit attributable to shareholders of 14.28/1.63 billion yuan, representing year-on-year changes of +8.7%/-5.7%. Revenue remained stable, while profit growth lagged behind revenue growth. By sub-segment: 1) Cosmetics: The cosmetics segment (excluding Hong Kong stocks) recorded revenue of 10.06 billion yuan in 26Q1, up 4.6% year-on-year, with net profit attributable to shareholders of 1.08 billion yuan, increasing 2.1% year-on-year. Among these, Botanee saw 26Q1 revenue/net profit rise 17.8%/132.8% year-on-year; Foriga reported 26Q1 revenue/net profit up 82.1%/87.7% year-on-year; Qingsong Co., Ltd. achieved 26Q1 revenue/net profit growth of 14.6%/1048.1% year-on-year. However, Proya, Shu Yang Co., Ltd., and Freda experienced declines in net profit attributable to shareholders, indicating significant divergence within the segment. 2) Medical aesthetics: The medical aesthetics segment generated revenue of 2.24 billion yuan in 26Q1, up 8.7% year-on-year, with net profit attributable to shareholders of 350 million yuan, down 35.5% year-on-year. Langzi Co., Ltd. reported 26Q1 revenue/net profit changes of +15.0%/-48.2% year-on-year. Additionally, industry leader Imeik Technology saw both revenue and net profit decline, with 26Q1 figures dropping 4.5%/32.8% year-on-year. 3) Personal care: The personal care segment achieved revenue of 1.98 billion yuan in 26Q1, surging 36.2% year-on-year, with net profit attributable to shareholders of 200 million yuan, jumping 55.1% year-on-year. Ruoyuchen, Lafang Home Products, Runben Co., Ltd., and Dengkang Oral Care reported net profit attributable to shareholders growth of 163.8%, 64.5%, 19.1%, and 20.0% year-on-year respectively in 26Q1, demonstrating outstanding sub-segment performance, which the firm attributes to product innovation upgrades or expanded product portfolios.

Risk warnings include slower-than-expected recovery in end-consumer demand, weaker-than-expected improvement in operating environment, and risks from international political changes.