Shangmei Co., Ltd. released the 24H1 performance report, with high revenue and profit growth. Revenue in the first half of the year was 3.502 billion/yoy +120.72%, net profit 0.412 billion/yoy +308.7%, gross profit margin 2.68 billion/yoy +144.6%, and gross profit margin 76.52% /+7.5pcts, mainly due to a further increase in DTC's share; sales rate increased 4.0pcts to 57.6% year over year, mainly to increase brand exposure, seize new channel opportunities, and increase investment in brand promotion and channel construction; R&D investment 78.3 million yuan, a year-on-year increase of 43.9%. The 24H1 net profit margin (11.78%) was lower than 23H2 (13.85%), and the sales rate increased slightly.

Develop multiple channels together and actively promote channel transformation. (1) Online channel: Achieving total revenue of 3.172 billion yuan, an increase of 145.6% year on year; in the first half of 2024, Han Shu ranked first as the beauty brand on the Douyin platform, and GMV reached RMB 3.444 billion, achieving a brilliant record of “No. 1 in the Douyin e-commerce skincare brand list”. The Han Shu brand grew rapidly and continued to gain momentum in the Douyin channel; the GMV of Han Shu's flagship store grew nearly 200% year over year. As the crowd increased and brand power increased, the Tmall platform may benefit from the Douyin channel spillover; JD may benefit from the Douyin channel spillover; Self-operated The flagship store grew by over 400%. (2) Offline channels: In the first half of 2024, revenue increased 12% year-on-year to 0.301 billion yuan; in January '24, the Hanshu brand held a CS channel conference to return to offline to improve profitability. The company's offline revenue in 2019 reached 1.314 billion, accounting for 45.7%, and has abundant offline resources. By opening Hanshu Douyin offline pickup points at high-speed rail stations, it can better serve consumers.

Super brand+ second growth curve, multiple brands lead sustainable development. (1) Han Shu: The 24H1 Han Shu brand achieved revenue of 2.927 billion yuan, an increase of 184.7% year over year, accounting for 83.6% of total annual revenue. In the first half of 2024, Han Shu's online channel GMV ranked second among domestic beauty brands; the growth rate reached 222.8%, ranking first among leading beauty brands. Red Man Waist Gift Box has sold over 10 million sets across all channels, while splitting the set into a large single item model; White Man Waist Gift Box has sold more than 1.5 million sets in all channels, becoming the core item after the Red Man Waist series; improving the product matrix through series such as White Man Waist and Blue Man Waist, it is expected that there is still plenty of room for future cost performance trends and the market to sink. (2) One page: 24H1's one-page revenue was 0.161 billion yuan, up 173.2% year on year. GMV on the online Douyin, Tmall, and JD channels all achieved year-on-year growth of more than three digits; offline, Newpage cooperated with more than 6,000 mother and child specialty stores and laid out new mother and child channels such as baby-friendly rooms. (3) Other brands: At the beginning of the year, a “2+2+2” strategy was proposed, forming 2 major 10 billion super brands for skincare, 2 powerful brands for mother and child care, and 2 major nursing superbrands to jointly expand the influence of the US in multiple categories, multiple tracks, multiple price ranges, and multiple audiences.

Investment advice: Shangmei Co., Ltd. has built a group organization. It is optimistic that e-commerce will continue to grow at a high rate in the short term. In the medium to long term, it is expected that it will continue to develop new brands in the beauty care industry and begin a second growth with strong marketing strength and mature channel support. The company's 24-26 revenue is expected to be 7.184 billion/9.109 billion/10.832 billion, and net profit to mother is 0.9 billion/1.166 billion/1.414 billion, respectively. The corresponding PE is 13.4X/10.4X/8.6X, maintaining a “buy” rating.

Risk warning: Competition in the industry has intensified, Douyin traffic costs have increased, and sub-brand incubation has fallen short of expectations.