Latest views
1) maintain the recommendation logic of “looking at channels in the short term, products in the medium term and brands in the long term”. In the short term, we need to seize the market share as soon as possible, and appropriate sales channels and marketing means are particularly important. New products and explosive products are conducive to the establishment of brand image in the initial stage; The rich product matrix in the medium term can help reach a more comprehensive consumer group, meet diversified needs, cover a broader product price band and increase the company’s penetration; In the long run, the core competitiveness of cosmetics companies is reflected in the R & D level. The core active ingredients with competitive barriers will improve the bargaining power of the brand, stabilize their market position and obtain the loyalty of consumers’ corresponding brands.
2) at the policy level, the outline of the 14th five year plan clearly promotes the influence and competitiveness of independent brands and cultivates high-end cosmetics brands; Guangdong, Zhejiang and other major cosmetic provinces have clearly cultivated 10 billion scale cosmetics leading enterprises in their respective high-quality development implementation plans. In October, the regulatory regulations on detailed fields were successively launched to further standardize the development and benefit the existing high-quality brands with standardized operation and guaranteed product quality. At the beginning of 2022, the standard of cosmetics production quality management was issued to continuously improve the product production management level.
3) strong sales of cosmetics in emerging channels: duty-free, thanks to the dual advantages of the suppression of outbound tourism by the epidemic and the liberalization of tax-free policies on outlying islands, it will maintain a high-speed growth trend, and cosmetics, as the largest category of sales in duty-free channels, will benefit from it. E-commerce mainly focused on the category and brand performance of the “double 11” online promotion activities in the fourth quarter. During the activities, the whole network sales of beauty and skin care were 54.7 billion, with a year-on-year increase of 35.5%, leading the growth performance.
4) some companies released the performance forecast for 2021. The three brands of Shanghai Jahwa United Co.Ltd(600315) , Syoung Group Co.Ltd(300740) and Yunnan Botanee Bio-Technology Group Co.Ltd(300957) performed well and could achieve a net profit growth of 50% – 65% or more. On the one hand, the pre increase in performance is due to the improvement of product sales (driven by multiple factors such as recovery after the impact of the epidemic and sales of new and explosive products). On the other hand, it shows the overall structural optimization of consumption in the cosmetics industry, and consumers gradually recognize the high gross profit skin care products under domestic brands, which coincides with the development direction of long-term brand strength supported by ingredients, research and development. In addition, Shanghai Shangmei submitted a Hong Kong stock prospectus in January, and its subsequent development deserves attention.
Investment advice
Combined with the investment logic of the cosmetics industry, we recommend: ① brands and online channel operators who pay attention to omni-channel construction and omni-channel marketing can enjoy the expansion bonus brought by the growth of online channel scale at this stage; ② It covers a full range of products, especially skin care and personal care products with relatively mandatory attributes and stronger cycle resistance. Consumers are more dependent on and loyal to such products; ③ Build brand strength and actively develop cosmetics products that meet market demand.
Risk tip: the risk of increasingly fierce market competition in the cosmetics industry.
