The company plans to buy 51% of Shanghai Jinjia, a cosmetics brand operator, for 810 million yuan in cash. The overall valuation of Shanghai Jinjia is 1.584 billion yuan, and the company plans to use cash to increase capital and acquire 51% of its equity, and the remaining equity is still held by the original founding team. after the acquisition, the company's layout in the direction of e-commerce and make-up will be further enriched. the strategy of becoming an international brand operation and management company is clearer.

Jinjia has rich experience in incubating overseas cosmetics brands, and the full-link ability of cross-border supply chain + domestic all-channel + KOL marketing expression builds competition barriers. 1) the incubation ability is different from that of the traditional generation operators, and its 21 brands are expanding rapidly. Jinjia is an operator and e-commerce integrated service provider specializing in the introduction of overseas high-quality cosmetics brands. the founder has experienced in the cosmetic industry for ten years, deeply cooperated with high-quality overseas minority brands, won the agency in the Chinese market, helped brands to land in China from 0 to 1, and successfully cultivated brands including First aid beauty, Rafra and other brands. at present, it has 21 overseas brands. 2) KOL resources are of high quality, and social platform marketing is efficient and accurate. Work closely with more than 20 influential KOL to directly complete brand concept expression and flow sales transformation in Weibo Corp, Wechat official account, Xiaohongshu and other platforms. 3) full-channel retail network coverage, warehousing and logistics and efficient supply chain to ensure a good experience for consumers. Online operation of 12 Tmall brand flagship stores, cooperation with JD.com Global Shopping, NetEase koala, Xiao Hongshu and other platforms, offline distribution to boutiques and Shang Chao supply; self-developed OMS, CRM, SCM information management system to achieve information interconnection, efficient warehouse logistics to ensure terminal shopping experience.

The acquisition realizes the strong complementarity of online channels and cosmetics, the full activation of self-media accumulation, and the initial emergence of the industrial chain layout of brand management. 1) the brand operation ability of the company will be significantly enhanced, the proportion of online channels is expected to increase rapidly, and the future incubation of independent cosmetics brands has full potential. Lafang is sound in the field of traditional daily chemical industry, with a solid position in Shang Chao and KA channels, high-end line and agent makeup have become new growth momentum, 18H1 high-end care brand Meadows has achieved a year-on-year growth of 32%, and agent makeup brand has achieved a year-on-year growth of 502%. In the future, high-end line and agent make-up brands are expected to cooperate with Jinjia to maintain strong growth. 2) the cooperation among the extension subjects is remarkable, and the landing of the daily chemical industry chain will fully show the vitality of the new business form. Head from the media package + MK cool into the rapid growth of the company system, Mini Program + official account to seize the social e-commerce tuyere, and Jinjia cooperate with the complete industrial chain closed loop, brand empowerment industry potential will be fully activated. 3) Jinjia is in a period of rapid explosion, and directly thickens the performance of listed companies. Jinjia has promised that the net profit for 2019-2021 will be no less than 1.2 billion yuan, 160 million yuan respectively, with a compound growth of 30%, which fully demonstrates its confidence.

The company's daily chemical industry layout is clear, the extension of emerging forms of investment layout ahead, is expected to fully integrate to stimulate potential, optimistic for the future to benefit from the vitality of new business type, the company's agency brand and independent incubation of beauty brands bring sustainable growth opportunities. The company's traditional big daily chemical washing and care field has a solid foundation, and the extension investment strengthens the brand operation ability, and it is expected to inject the driving force of continuous growth into the field of Gaojing demeanor beauty. And the major shareholders have increased their holdings many times in the past half a year, and the company intends to buy back no less than 40 million yuan and no more than 100 million yuan of shares, fully demonstrating the confidence of long-term development. Taking into account that mergers and acquisitions have not yet been fully landed, we maintain the original profit forecast. The 18-20 year return net profit is RMB 185,000,000, corresponding to PE, which is respectively times that of 17-15-13. If the merger and acquisition is completed, the 18-20 pro forma return net profit is RMB 185pm, and the corresponding PE is only 17-12-10 times, maintaining the overweight rating.