Futu Securities released a research report stating that recent comprehensive policy measures, coupled with dual intensification of monetary and fiscal policies, are expected to drive gradual recovery in consumption through the transmission of the stimulus chain. In this process, the beauty and skincare sector, with strong growth potential, powerful catalysts, and valuations at the bottom, is expected to benefit first.

The main points of Zheng Securities are as follows:

Main theme of beauty and skincare: Comprehensive policies are being implemented, and the beauty and skincare sector is expected to benefit first.

Industry changes: (1) Chuangjian Medical is planning to list on the National Equities Exchange and Quotations and has been approved. The company is one of the leading companies in the reorganization of the entire collagen industry chain, with products including multiple types of collagen such as Type I, Type II, Type III, Type XVII, Type III small molecules, and Type XVII small molecules. In 2023, the company's revenue was 0.283 billion yuan, up 61%, and net income was 63.6491 million yuan, up 80%. In 2023, roughly 50% of the revenue came from reorganized collagen raw materials and end products.

(2) Fujian Cosunter announced that the company's research product, 'recombinant Type III human collagen freeze-dried fibers,' has completed clinical trial filing and can now proceed with clinical trials. It is the company's first shallow injection filling product, which improves skin condition through the moisturizing and hydrating effects of recombinant Type III human collagen. This initial clinical trial filing marks the company's first step in expanding its medical aesthetics business, laying the foundation for new growth in the company's medical aesthetics business.

(3) Bloomage Biotechnology's production base in Xiangtan has started operation with a total planned investment of 0.2 billion yuan. It has a medical device clean production workshop and laboratory with a cleanliness level of ten thousand. The products at this base include a range of medical devices like injectable cross-linked hyaluronic acid sodium, hyaluronic acid sodium gel, and medical biological glue, with an expected annual output value of several billion yuan.

(4) Sihuan Pharm announced the exclusive sales agreement for the injection type A botulinum toxin Letaibao signed with Hugel, a South Korean biopharmaceutical company. The agreement has been renewed until the end of 2030 as confirmed by both parties.

(5) Lancy Co.,Ltd. disclosed in an announcement its intention to jointly sign a "Joint Venture Contract" with its affiliates, Langxi Aesthetics and Boheng No. 3, with proposed investments of 15 million yuan, 20 million yuan, and 65 million yuan respectively, to establish Langxi Ziyan, mainly engaged in the production and operation of Class III medical equipment.

Key point: Recently, multiple policies have been comprehensively implemented. With the dual reinforcement of monetary and fiscal policies, the bank expects that the stimulus chain transmission will drive consumption to gradually recover. In this process, the beauty and skincare sector, which has strong growth potential, strong catalysts, and valuation at the bottom, is expected to benefit first.

(1) Beauty and skincare sector possesses strong resilience and growth prospects. Driven by high potential in segmented high-growth tracks and leading players, the overall resilience shows strong growth, Q3 domestic leading brands continue high growth in the trend of domestic brand rise; In addition, the medical aesthetics new materials such as Weiyimei and Aisufei continue high growth in the off-season, outperforming expectations.

(2) October will soon usher in the November 11 shopping festival. As Tmall and Douyin focus on overall GMV growth and abandon vicious low-price competition, the performance of November 11 shopping festival is expected to be stronger than June 18. Moreover, the trend of domestic brands rising continues with the possibility of exceeding expectations. The peak season for medical aesthetics is approaching, and upstream performance is expected to significantly recover month on month, with new product growth still in an explosive period.

(3) In the previous overall flat background, market sentiment continues to decline, with valuations currently at historical lows. Some targets have historically low proportions of mutual fund holdings, and are expected to have strong recovery resilience.

Recommended target focus: (1) Definite leading targets: Proya Cosmetics, Imeik Technology Development, Juzi Biotechnology, Jinbo Biotechnology, etc.;

(2) High-growth elastic targets: Chicmax, Guangdong Marubi Biotechnology, Runben Corporation, Jiangsu Wuzhong Pharmaceutical Development, Kedi, Syoung Group, etc.;

(3) Distressed reversal leading targets: Bloomage Biotechnology Corp. Ltd., BeitaiNi, Med Beauty, Shanghai Jahwa United, Lushang Freda Pharmaceutical, Sisram Med, etc.;

(4) Elastic targets for the full industry chain recovery: Nanjing Cosmos Chemical, DengKang Stomatology, Beautyfarm Med, etc.

Retail main line: Miniso invests in Yonghui Superstores, and the old store gold will have the second price adjustment of the year on 9/23.

Industry changes: (1) On September 23, Miniso plans to acquire 29.4% of the equity of Yonghui Superstores for 6.27 billion RMB, including the 21.08%, 4.05%, and 4.27% equity stakes held by the Milk Company, JD World Trade, and Hanzhong of Suqian respectively. After this transaction, Miniso will become the largest shareholder of Yonghui Superstores.

(2) On September 25, the Shanghai Municipal Government announced that 0.5 billion yuan of municipal financial funds will be allocated for this round of service consumption vouchers. According to the proportion of consumption in various fields and the needs of citizens, the distribution of voucher funds is as follows: dining 0.36 billion yuan, lodging 90 million yuan, movies 30 million yuan, sports 20 million yuan.

(3) According to LatePost, Taobao Tmall is about to officially integrate with JD Logistics and is expected to go live in mid-October. Afterwards, Taobao Tian sellers will have the option of JD Logistics when choosing the delivery method in the system. At the same time, JD will also integrate with Cainiao Express and Cainiao Post.

(4) On September 25, JD announced the opening of the country's first JD Outlet offline store in Jiangyin City, Wuxi, Jiangsu Province, and launched the official JD Outlet flagship store.

(5) On September 26, according to Yibang Power, the 2024 Tmall Double 11 presale has started recruiting merchants. The pace of this year's Tmall Double 11 will be advanced by about a week, starting presale on October 14 and paying the first installment from October 21st to 24th.

(6) On September 27, the parent company of Sun Art Retail, Haxin Retail, announced on the Hong Kong Stock Exchange that the company's shares were temporarily suspended from trading on the Hong Kong Stock Exchange starting at 9:39 a.m. on September 27, 2024, pending the issuance of an announcement containing insider information in accordance with the rules on acquisitions and mergers.

(7) Recently, with the Fed rate cut, the price of gold continued to rise. Lao Pu Gold raised prices for the second time this year on 9/23. According to statistics, this price adjustment ranged from 4% to 11%.

(8) Chow Tai Fook issued an announcement this week, announcing that Mr. Zheng Zhigang, an executive director of the company, will resign from the position of executive director on September 26, 2024, due to personal considerations for further involvement in public service and other personal matters. This change will take effect on September 26, 2024.

Key points: (1) Currently, offline retail as a whole is facing certain performance pressure in the current environment. Recently, Miniso acquired shares in Yonghui Superstores. The bank believes that after Miniso becomes Yonghui's largest shareholder, it will accelerate the integration and transformation of the Chinese retail industry. This change may prompt other retailers to strengthen cooperation or engage in similar merger activities. It is recommended to continue to pay attention to relevant symbols such as [Yonghui Superstores].

(2) In the gold and jewelry sector, after the Fed rate cut, the price of gold continued to rise. This week, it fluctuated at a high level in the range of 590-600 yuan/gram (previously fluctuating in the range of 550-570 yuan/gram from July to early September). The rise in gold prices may to some extent affect the sales at the end of the year. However, dealers may have completed orders during the September ordering event and benefited from the rise in gold prices. Therefore, the short-term impact on Q3 listed company reports may be minimal. In addition, after the shift in monetary policy, the sector's valuation may recover, and the sector's overall dividend yield is high. Focus on 1) leading companies with high dividends and low valuations such as Chow Tai Fook, Lao Feng Xiang, Chao Hongji, Chow Tai Seng, China Gold, and Caibai Shares; 2) targets with explosive growth in performance like the Lao Pu Gold.

Textile and apparel mainline: With the shift in domestic monetary policy, the textile and apparel focus on investment opportunities in the sports industry chain and high dividend sectors.

(1) Baoxiniao raised funds from major shareholders for the purpose of supplementing working capital and repaying bank loans. On September 28, Baoxiniao announced that it will issue a total of no more than RMB 0.8 billion to major shareholder Mr. Wu Zhi Ze at a price of 2.8 yuan/share. After the issue, Mr. Wu Zhi Ze and his concerted action parties will collectively increase their shareholding ratio from 38.09% to 48.22%.

(2) Semir Garment issued stock incentives. On September 25, Semir Garment issued stock incentives, granting 97.2335 million stock options to 144 eligible incentive recipients at an exercise price of 3.69 yuan per share. The stock options granted under the incentive plan will be exercisable in three installments 12 months after the authorization date, with exercise ratios of 40%, 30%, and 30% for each installment. The incentive plan will assess the company's performance indicators on an annual basis during each exercise period: the 2024 net income threshold value is RMB 1.2 billion (yoy +7.0%), challenge value is RMB 1.3 billion (yoy +15.9%); 2025 net income threshold value is RMB 1.5 billion, challenge value is RMB 1.7 billion; 2026 net income threshold value is RMB 1.8 billion, challenge value is RMB 2.2 billion.

Winner Medical spent 0.12 billion MMF to acquire 75.2% equity of Global Resources International Inc.,GRI, in the United States. Winner Medical acquired 75.2% equity of Global Resources International Inc. with 0.12 billion US dollars. It was established in 2000, a global medical consumables and industrial protection enterprise based in Georgia, USA. This acquisition optimized the global production and logistics layout, enhanced operational capabilities in the United States and Europe, enriched product lines, strengthened R&D capabilities, and was an important step towards the company's global strategy, marking a milestone.

Key Points: On September 19, the Federal Reserve announced a rate cut. On September 24, the three financial departments jointly held a press conference, providing guidelines on liquidity portfolio policies, indicating a shift in domestic monetary policy. In this context, the textile and apparel industry focuses on: (1) Sportswear brands currently valued at the bottom. In the short term, domestic sportswear brands are under pressure fundamentally, with no visible improvement at the margin. However, the past performance of the sports industry has proven its excellent track record. During the rate cut cycle, attention is given to high-quality sportswear leaders: Anta Sports, Li Ning, Xtep Int'l, 361 Degrees.

(2) Men's clothing sector with high dividend yields. The overall performance of the mid-to-high-end men's clothing sector this year is under pressure, but the sector as a whole maintains a high level of dividend payout ratio, currently with a high dividend yield. At the press conference held by the three financial departments on September 24, a new monetary policy tool was established, creating share buybacks, special refinancing for increasing shareholding, guiding banks to provide loans to listed companies and major shareholders to support stock buybacks and increases in shareholding. This policy is beneficial to men's clothing sectors with high dividend yields and stable overall performance such as Biem.l.fdlkk Garment, HLA Group Corp., Youngor Group, Baoxiniao.

(3) Manufacturing sector with positive short-term fundamentals. On the manufacturing side, overseas brand inventories are generally healthy, with a strong trend towards improving subsequent orders. Most European and American sportswear brands have shown good performance in Q2, with a relatively optimistic outlook for 2024. Future manufacturing data is expected to continue to validate the trend, with the sector poised for excellent performance.