CHICMAX: Keenly grasps the changes in the cosmetics industry and becomes the leading domestic multi-brand cosmetics leader. Mr. Lu Yixiong, the founder of the company, was born in 1978 in Shantou, the fertile land of business, and opened a cosmetics wholesale and retail franchise store in Xi'an in 1999. In the next 20 years, we have discovered that no matter how the cosmetics channel changes or how consumer buying habits change, Shangmei Group can always lead its core brands to “get out of the ring” in different eras, crossing the peak and trough of cosmetics marathons and growing into a leading domestic enterprise with multiple brands and strong operations.

This article starts with a review of the development history of Shanghai American shares over 20 years. It thoroughly analyzes how the company can calmly face every critical period in history in the past few rounds of changes in the cosmetics industry, and transcend cycles and resilient growth.

Brand startup (2003-2005): Launched in the 3rd and 4th tier, grasped the K-pop trend, and the brand broke through the circle. Han Shu was born around 2000. In the early days of its establishment, Han Shu closely followed K-pop in brand promotion, such as signing Korean actress Choi Ji-woo as the brand ambassador and explaining the origin of the brand name as the Korean city “Sokcho”, etc.; at the same time, the brand quickly gained brand awareness. At the same time, the brand had a keen insight into potential opportunities in the third- and fourth-tier markets, thoroughly laid out specialty store channels, and positioned a mass price band of less than 200 yuan differentiated from major international brands, and initially gained a foothold in the domestic cosmetics market.

TV shopping stage (2006-2010): closely following consumer changes, forwardly grasping TV shopping channels, and entering the market for the second time. Domestic TV shopping channels emerged in 1992, and later became the main shopping channel with advantages such as convenience and product diversity; from 2000 to 2005, they fell into a period of adjustment; around 2006, they ushered in an inflection point and accelerated development. Lui Yi-hung was keenly aware of TV shopping trends and led the Han Shu brand to actively lay out more than 30 TV shopping channels; through the high exposure of TV programs, Han Shu reached more third- and fourth-tier consumers, and the brand's sales capacity was further enhanced. By 2011, nearly 50% of Han Shu brand sales were contributed by TV shopping channels.

Development “Focus” (2010-2014): Focus on the Han Shu brand and focus on TV commercials. Around 2010, based on previous brand accumulation, Han Shu tried to upgrade its image, seeking a breakthrough in the high line market, and launched products such as Red BB Cream; the marketing side grasped provincial TV commercials and sponsored the ace programs of many TV stations such as Jiangsu TV, such as “Do Not Disturb” and “Every Day Up”; at the same time, he launched cinema channels such as Wanda and Jingmao to further increase regional advertising at high-speed rail stations in Tier 1 and 2 cities to further increase regional advertising Brand exposure.

Multi-brand development stage (2014-2017): The multi-brand strategy was restarted, and the prototype of group operation gradually became apparent.

In May '15, the company completed the first round of financing of 0.4 billion yuan. The investors were CITIC Capital, Lianxin Capital, and Ximei Capital, co-founded by Ge Wenyao, the former chairman of Shanghai Jiahua, which has rich industry resources and experience. In the second half of '15, the company restarted a multi-brand strategy, launched the mother and child care brand Red Elephant and high-end care brand Sovia, and replicated Han Shu's high-profile brand operation model into its brands, with the title signing spokesperson, variety shows, etc., to help the Shanghai company increase its name and sales volume. In the US, group operations began.

Adjustment period (2017-2019): Channel changes, internal and external concerns, company adjustments and exploration. In 2017-2019, beauty product sales channels changed to online. Driven by external factors such as consumer upgrading trends and mainstream online platform promotion support, international brands accelerated to embrace e-commerce platforms to seize market share. Emerging beauty brands seized the rise of Internet content marketing, while traditional domestic brands such as Han Shu fell into a growth bottleneck due to channel layout and marketing strategies that failed to keep up with the market pace; at the same time, the company's online online channel price problem revealed that the “No. 1 position” moved to overseas market layout but had little effect.

Emerging e-commerce stage (2020 to present): The focus has returned to online, and high growth has been achieved again. Since 2020, the company has implemented the strategy of “fully embracing online channels”, set up social retail, social e-commerce, social live streaming, and new retail e-commerce departments, and dug deep into new traffic positions such as Douyin and Xiaohongshu to continuously improve online operation capabilities; after many trials and errors, the company chose to focus on the Douyin channel and focus on resource cultivation cards, which are cost-effective, practical, and refined; in 2023, the Hongman Package took the lead in achieving high traffic dividends for Chinese and short dramas;, the brand continues to improve the broadcast and self-broadcast matrices to match high transactions The converted store-style live broadcast promoted the continued growth of Han Shu's brand potential and red waist gift box sales.

Investment advice: Through reviewing the company's development history of more than 20 years, we found that the company was able to keenly understand market changes and respond quickly, showing strong resilience even during relatively difficult adjustment periods. We believe that the company is a true enterprise with both offensive and defensive attributes and has the potential to become a cosmetics company with 10 billion dollars in revenue. The net profit of the company is expected to be 0.9/1.16/1.37 billion yuan in 2024-2026. The closing price corresponds to PE of 17/13/11X, maintaining the “recommended” rating .

Risk warning: Industry competition increases risks, channel expansion falls short of expectations, and brand cultivation falls short of expectations.