In the third quarter, the cosmetic industry's landscape is relatively diversified, with significant differences in operating pace among companies against the backdrop of overall weak industry demand.
According to the Securities Times app, gtja released a research report stating that in the third quarter, the cosmetic industry's landscape is relatively diversified, with significant differences in operating pace among companies against the backdrop of overall weak industry demand. From January to September 2024, cosmetics retail sales in the social zero category decreased by 1%, lower than the overall social zero growth rate by 4.3 percentage points. Among them, in Q1, Q2, and Q3 of 2024, cosmetics retail sales in the social zero category increased by 3.4%, decreased by 1.2%, and decreased by 5.5% respectively. In the third quarter, the cosmetic industry, being a low season, further weakened due to the impact of intense promotions and overall consumer pressure. The proportion of holdings of A-shares of cosmetic companies in Q3 decreased month-on-month, while the proportion of holdings of Hong Kong shares increased. The proportion of holdings through the Hong Kong Stock Connect of giant companies in Hong Kong, such as Syoung Group and Chicmax, reached 16.70% and 10.86% respectively, with month-on-month increases of 0.90 and 1.02 percentage points, mainly due to the overall recovery of Hong Kong stocks and strong performance in the first half of 2024.
GTJA's main opinions include:
In Q3 of 2024, cosmetics retail sales decreased by 5.5% year-on-year, showing a weakened performance in the low season.
From January to September 2024, cosmetics retail sales in the social zero category decreased by 1%, lower than the overall social zero growth rate by 4.3 percentage points. Among them, in Q1, Q2, and Q3 of 2024, cosmetics retail sales in the social zero category increased by 3.4%, decreased by 1.2%, and decreased by 5.5% respectively. In the third quarter, the cosmetic industry, being a low season, further weakened due to the impact of intense promotions and overall consumer pressure. Singles' Day sales have started. According to brand feedback and online data, this Singles' Day has been extended further compared to 2023. The performance of pre-sales on the first day was flat, but it is expected that the daily sales by the brands will drive growth. Multiple brands on Douyin in October saw high growth, with GMV approaching that of the entire 2023 Singles' Day period. It is expected that demand will improve month-on-month under the catalysis of major promotions.
In the third quarter of 2024, the overall performance of sectors was relatively weak, with a slight year-on-year increase in sector income, dragged down by some companies in an adjustment period, leading to a decrease in profits and increasing differentiation.
In Q1-Q3 of 2024, the cosmetic sector achieved an income and net income attributable to the mother of 34.9 billion and 3.9 billion, respectively, with year-on-year increases of 5.6% and 4.26%. In a single quarter in Q3, income and net income reached 10.2 billion and 0.8 billion, respectively, with year-on-year increases of 0.5% and -24%. The income growth rate declined month-on-month, and profits declined under the drag of some companies in an adjustment period.
The sectors within the sector show significant differentiation, with performance being more affected by individual factors such as company's global strategy, product lifecycle, and distribution channels. Companies with strong brand and product dynamics have shown better growth. In Q3, proya cosmetics, Runben Co., Ltd., Guangdong Marubi Biotechnology, Guangzhou Ruoyuchen Technology, and Jinbo Biotechnology have performed well. In addition, Fujian Green Pine has significantly recovered its profits. Some companies have been affected by business adjustments or increased expenses, leading to visible pressure on profits. The cosmetic industry landscape is relatively scattered, with significant differences in the operational pace of each company against the backdrop of subdued overall demand in the industry. It is recommended to pay attention to the subsequent strategies and organizational adjustment progress of each company.
The proportion of holdings of A-share cosmetic companies decreased on a quarterly basis in 2024 Q3, while the holdings in Hong Kong stocks increased quarterly. The sector's valuation has recovered, and the growth premium is gradually becoming apparent.
In 24Q3, the average holding ratio of domestic institutions in cosmetic companies was 5.99%, a quarterly decrease of -3.59%, and a year-on-year increase of +2.81%. The quarter-on-quarter decline was mainly due to Q3 being the off-season for beauty consumption. Proya cosmetics, Bloomage Biotechnology Corporation Limited, Syoung Group, Runben Co., Ltd., Dengkang Stomatology, and Jinbo Biotechnology all have relatively high fund holding ratios. Hong Kong stocks like Chicmax and Guangdong Marubi Biotechnology's holdings through the Stock Connect Program reached 16.70% and 10.86% respectively, with a quarterly increase of 0.90 and 1.02 percentage points, mainly due to the overall improvement in Hong Kong stocks and the strong performance of the companies in the first half of 24.
As market sentiment improves, the valuation of the cosmetic sector, as a growth sector, has increased. Currently, many symbols in the sector correspond to a 2024 PE ratio between 25-30x. Small and medium market cap companies show growth premiums, with faster-growing companies such as Guangdong Marubi Biotechnology, Jinbo Biotechnology, and Runben Co., Ltd. corresponding to a 2024 PE ratio of around 30 times. However, overall, most companies have a 2024 PEG still less than 1.
Relevant symbols:
A-share: Proya Cosmetics (603605.SH), Bloomage Biotechnology Corporation Limited (688363.SH), Syoung Group (300740.SZ), Runben Co., Ltd. (603193.SH), Dengkang Stomatology (001328.SZ), Jinbo Biotechnology (832982.BJ), Guangdong Marubi Biotechnology (603983.SH), Guangzhou Ruoyuchen Technology (003010.SZ), Fujian Green Pine (300132.SZ).
Hong Kong stocks: Chicmax (02367), Guangdong Marubi Biotechnology Corporation Limited (02145).
Risk Warning: Downturn in industry prosperity; intensified competition at the brand end; new product performance below expectations, etc.
