The State Food and Drug Administration issued the measures for the monitoring and management of adverse reactions of cosmetics: the provisions will come into force on October 1, 2022. The regulation clearly states that the reporting of adverse reactions of cosmetics shall follow the principle of “reporting when suspicious”, and any suspected human damage related to the use of cosmetics shall be reported. The regulation specifies the monitoring obligations of various subjects. Various subjects such as cosmetic registrants, recorders, entrusted production enterprises, cosmetic operators and medical institutions shall report adverse reactions of cosmetics according to the regulations. At the same time, it is clear that the registrant and filer of cosmetics should first establish a monitoring and evaluation system and reasonably allocate institutional personnel; Then, through active collection, timely reporting, analysis and evaluation, risk control, cooperate with relevant departments to carry out the investigation and treatment of adverse reactions of cosmetics, and finally file and save the past monitoring records.
Market review: textile and garment sector: last week (February 21 to February 25, 2022), the Shanghai Composite Index, Shenzhen Component Index and Shanghai Shenzhen 300 index increased by – 1.13%, – 0.35% and – 1.67% respectively, and the textile and garment sector fell 0.42%, ranking 15th among 31 Shenwan industries; Among them, the textile manufacturing sector fell 0.67%, and the clothing and home textile sector fell 0.70%. In the past month (from January 26, 2022 to February 25, 2022), the Shanghai Composite Index, Shenzhen Component Index and Shanghai Shenzhen 300 index increased by + 0.53%, – 1.98%, – 2.24% respectively, and the textile and garment sector increased by 3.69%, ranking 10th among the 31 Shenwan industries.
Cosmetics sector: the cosmetics sector fell 1.34% last week, outperforming the Shanghai and Shenzhen 300 index by 0.33pct. The cosmetics sector rose 4.83% in the past month, outperforming the Shanghai and Shenzhen 300 index by 7.08pct. Compared with 31 industries in Shenwan, the cosmetics sector ranked 17th in the past week and 9th in the past month.
Industry news: Alibaba’s customer management revenue fell 1% year-on-year in the third quarter of fiscal year 2022; In the fourth quarter of fiscal year 2021, Moncler brand Chinese mainland market sales increased by nearly three figures year-on-year. The revenue of allbirds, an innovative shoe brand in San Francisco, increased by 27% year-on-year in 2021; From January 1 to February 18, 2022, the number of domestic cosmetics filed decreased by 75% year-on-year; Dewylab, a pure beauty brand, announced the completion of a ten million dollar pre-A round of financing.
Investment suggestions: 1) textile and garment industry: from the perspective of fundamentals, we maintain the previous view, and the performance of the industry will still be subject to terminal demand. From the market perspective, the recent war between Russia and Ukraine will promote the rise of risk aversion. We can pay attention to the related targets of undervalued and high dividend rate in the field of textile and clothing (see the attached table for details). In terms of stock targets, we have long recommended brand targets related to sportswear with the sustained prosperity of sports tracks and the catalysis brought by the Winter Olympics, and continue to recommend Anta sports, Li Ning and Tebu International; In the field of non sportswear, it is believed that the high-end category has strong consumption toughness, and it is recommended to pay attention to the leaders of undervalued sub categories, including the leader of medium and high-end home textile Luolai Lifestyle Technology Co.Ltd(002293) , the brand of high-end sports fashion Biem.L.Fdlkk Garment Co.Ltd(002832) , Baoxiniao Holding Co.Ltd(002154) (it owns hazzys, a sports fashion brand). In terms of textile manufacturing, Shenzhou International and Huali Industrial Group Company Limited(300979) , which have strong growth sustainability and a solid position as a high-quality head manufacturer, continue to be recommended.
2) cosmetics industry: the cosmetics industry maintains the previous view. The overall environment of intensified industry competition, increased layout of international brands, differentiated consumer demand and stricter industry supervision still exists. It is believed that Chinese brands still need to make continuous innovation and breakthrough in product strength. “38” e-commerce promotion is imminent. As one of the highlights of e-commerce in the first half of the year, we look forward to its sales performance and bring a certain boost to the performance. We believe that companies with large product accumulation and strong product strength will perform more prominently. We continue to recommend Proya Cosmetics Co.Ltd(603605) and other sensitive skin care leaders Yunnan Botanee Bio-Technology Group Co.Ltd(300957) , which actively improve the product power, have strong operation ability, have formed a clear strategic layout of multiple large single product series, multiple categories and multiple brands, have high performance growth, have a solid position as subdivided leaders, actively expand new categories and effects, and actively increase brand investment to enhance influence.
Risk tip: the macroeconomic growth rate is down, and the terminal consumption is weak due to repeated epidemics or extreme weather, which affects the consumption demand of clothing, cosmetics and other products; The intensification of industry competition and the price war of foreign leading brands will have an adverse impact on China’s benchmark brands; E-commerce platform traffic growth slowed down and traffic costs increased.
