Shangmei Co., Ltd. is a leading multi-brand domestic cosmetics company that has been deeply cultivated for more than 20 years, focusing on Han Shu Zhongbing to achieve a strong brand renewal, winning the top 1 in the 2023 Douyin beauty list, becoming the platform's first 3 billion beauty brand, driving revenue +56.6% year-on-year in 2023; net profit to mother +213.5% year over year; currently Han Shu is still on the rise, and the multi-dimensional curve iteration is expected to push Han Shu to become a 10 billion brand. Other brands are currently in a period of cultivation and adjustment. In the future, they will start with popular skincare and become leading platform-based enterprises with the three major skincare tracks and six major superbrands.
Analysis of Han Shu's path to the rise of Douyin: Differential Positioning, Content Dividends, and Strong Channel Operation Commitment to Achieve High Growth. Currently, Douyin is still in the dividend period of rapid growth. Combined, white cards account for a relatively high share, providing high-quality soil for the rise of cost-effective popular brands. In 2023, under the remodeling of the company's top-level strategy, it focused on Han Shu Douyin and created a cost-effective popular waist package, benefiting from the cost-effective consumer trend, and its “cost-effective package+anti-aging mentality” position was significantly differentiated compared to mainstream domestic leading brands. At the same time, the forward-looking layout drew short dramas from Douyin talent, efficiently reached a large number of young customers, and efficiently carried out customer base transformation with GMV surpassing 3.3 billion dollars.
Underlying advantages: Strong management insight, strong execution, and strong organizational structure and flexibility are core elements in seizing opportunities, and R&D reserves are expected to empower brand upgrading. The company's equity structure is concentrated, and the decentralized organizational structure of the multi-brand division is superimposed on multiple incentive policies to build a talent system, effectively achieving rapid response to market changes and accurately grasping each channel dividend. In addition, the company completed the construction of an independent R&D system through a three-step jump, built strong barriers to R&D technology, achieved the implementation of four basic research, and enabled the sustainable development of multiple brands; in 2023, the company made a breakthrough self-developed “cyclic hexapeptide-9”, based on technological leadership on the anti-aging raw material side, further consolidating the brand's “scientific anti-aging” mentality.
The multi-dimensional curve iteration is expected to support Han Shu's move towards a space of 10 billion dollars. Superbrands are first+ comprehensive matrix reserves, which is expected to push the company to become a leading domestic beauty care group. Differential and accurate access between the segmented product package+self-broadcast. The potential of Bai Man Waist has already begun, and it is expected that the successful experience of Red Man Waist will be replicated. Douyin traffic spilled significantly to Taoxian, and Tmall continued its high three-digit growth trend; at the same time, in 2024, it was announced that it will increase offline. The vast offline channel space is expected to handle Douyin traffic spillover, and the multi-dimensional iterative curve is expected to support Han Shu's expansion to 10 billion. With the gradual inflow of investment resources and the replication of mature experience in 24 years, Ichiyobi and Red Elephant are expected to usher in new growth. The company has performed brilliantly, adding the new brand Newpage, etc., to perform brilliantly. The company has carried out a differentiated layout of multi-brand segmented tracks to fill the company's middle and high-end price gap, and is expected to continue to grow.
Investment suggestions: The company's Douyin growth potential is maintained, and the trend of large single products is expected to continue to rise in the future; the brand effect spilled significantly to Taobai, and the Tmall platform's low base was determined to enhance; at the same time, it was announced in 2024 that it will increase offline, and the broad space of offline channels is expected to handle the Douyin traffic spill.
In the future, with the gradual inflow of investment resources and the replication of mature experiences, old brands are also expected to usher in renewed growth. Looking at the medium to long term, the company implements the “2+2+2” strategy and the “six six strategy”. The multi-brand matrix can be expected to expand in the future, which is expected to continue to grow. The net profit for 24-26 is estimated to be 9.1 billion yuan, 11.6 billion yuan, and 1.41 billion yuan, respectively. The corresponding growth rates are 96.5%, 27.5%, and 22%, respectively. Corresponding PE is 18, 14, and 12X, maintaining a “highly recommended” rating.
Risk warning: industry competition intensifies, new channel expansion falls short of expectations, new brand incubation risks