As of the third quarter of 2024, the cosmetics industry is facing more severe challenges. According to the latest data from the National Bureau of Statistics, in the third quarter of this year, the total retail sales of cosmetics fell by about 6% year-on-year, and the cosmetics social retail data has been declining since June.

Against the background of significantly insufficient external market demand, Shanghai Jahwa United Co., Ltd. (hereinafter referred to as Shanghai Jahwa), a leading domestic beauty and cosmetics enterprise, recently disclosed its third quarter report for 2024. The data shows that Shanghai Jahwa achieved revenue of 4.477 billion yuan in the first three quarters, a year-on-year decrease of 12.07%, with net income attributable to the mother of 0.163 billion yuan, a year-on-year decrease of 58.72%. Shanghai Jahwa's revenue and profits are under pressure, mainly due to the company being in the midst of comprehensive deepening reform, but the company's domestic business decline is limited, and overseas business is improving season by season. In addition, the company's year-end inventory decreased by 20.36% year-on-year, accounts receivable decreased by 27.14% year-on-year, operating cash flow from January to September increased by 28.6% year-on-year, the operational quality has greatly improved, which further reflects that the company's fundamentals have not changed, this is also the reason why the author remains bullish on Shanghai Jahwa. As a representative of domestic consumer goods, Shanghai Jahwa has shown reform resilience, laying the foundation for achieving higher quality development in the future.

Stable operation, solid progress in brand building.

From the performance of Shanghai Jahwa in the third quarter, the company operates steadily. It is reported that Shanghai Jahwa continues to deepen reform, and proactive strategic adjustments are one of the main reasons for the decline in performance in the third quarter, this factor mostly has a temporary impact on the company. In addition, the company is preparing for future development by increasing the intensity of brand investment, which also to a certain extent affects the profit level.

In terms of brand building, the two core brands, Liushen and Yuzha, have performed impressively. Liushen enhances a cool and refreshing demeanor among young people while speeding up its online development. In Q3, the GMV of e-commerce achieved double-digit growth, and the third Liushen 'Cool Festival' launched in July had an effective exposure of over 0.4 billion, effective interaction of 5.75 million, a 10% year-on-year increase in new fans, and the flagship store GMV on Douyin achieved triple-digit year-on-year growth, strengthening marketing conversion rate. Yuzha further solidified the cornerstone of collaborative medical research in sensitive skin care, significantly strengthened investment in professional dermatology research, and established advantageous collaborations with major third-grade hospitals nationwide: Yuzha's Centella Asiatica Mask clinical data was published in an international SCI journal; Yuzha's large molecule sunscreen product led the first human safety clinical study on the exposure of sunscreens in the body in China; Yuzha's Chief Scientist, Professor Fumaqiang, was honored as one of the top 2% of global scientists. Additionally, Shanghai Jahwa continues to enhance its research and development capabilities to build its brand strength based on product and R&D capabilities. In the first three quarters, Shanghai Jahwa applied for 108 new patents, a 71% year-on-year increase; participated in the revision of 18 national, industry, and organizational standards; published 13 articles in foreign journals with an average impact factor of around 6, utilizing 'AI + digitalization' technology to establish a complete research and application methodology for Chinese characteristic plants and submitted the record of the first new raw material.

Reform adjustments are in progress, Shanghai Jahwa still needs time to stabilize its revenue and profit in the short term. It is worth noting that the effects of the company's reforms are gradually becoming apparent.

The initial effects of the reform are evident, laying the foundation for long-term development.

Since Lin Xiaohai took office, Shanghai Jahwa has made bold adjustments in brand building, organizational structure, talent introduction, and more. It is reported that Shanghai Jahwa has now completed the organizational structure adjustment in stages, upgraded the original talent system, established a unified command center with the brand as the core, and created an agile organization for timely decision-making.

The comprehensive reform effects have gradually begun to show, and Shanghai Jahwa United's online operation capabilities are gradually improving. Since the november 11 shopping festival-related began, Shanghai Jahwa United has fully leveraged its cni resource index on multiple platforms, further enhancing brand exposure, collaborating with many beauty influencers, and making concerted efforts across platforms such as Tmall, Douyin, and Kuaishou, achieving both brand visibility and sales growth. As of the end of the first phase of pre-sales, Yuzhuo has achieved rapid growth, and Shuangmei Yurong Frost by Li Jiaqi was sold out in 1 minute, both of which validate that Shanghai Jahwa United's online operation capabilities are developing in a more mature and efficient direction.

Enterprise reform brings long-term benefits. By extending the timeframe, Shanghai Jahwa United's reform progresses from shallow to deep, from optimizing organizational structure to talent acquisition, from strategic adjustments to business line layout, with each step embodying considerations for long-term development. Under the unified command centered on the brand, the market performance of Shanghai Jahwa United, a century-old enterprise, is expected to stabilize and rebound.