Key investment points:
Cosmetics have scientific, functional and emotional attributes. 1) Scientific attribute: the ingredient development of cosmetics begins with basic research, and the formula selection is inseparable from the blending technology, which determine the scientific attribute of cosmetics. Cosmetics is a compound mixture made of various raw materials with different properties through reasonable allocation and processing. The process flow is relatively simple. Therefore, it is easy for cosmetics enterprises to get started and the product error rate is low. However, the use of products is not equal to the usefulness of products. The core difference lies in the ingredient addition and formula selection in the production process of cosmetics. Behind it is the scientificity of basic research and blending technology; 2) Functional attributes: consumers’ needs for skin care and daily makeup of the face jointly determine the functional attributes of cosmetics. The skin care functions of cosmetics can be divided into three categories: cleaning, basic maintenance and special effects. The skin care quality corresponding to each type of function is different and needs to be matched with different nursing methods. Therefore, from the horizontal point of view, the comprehensive nursing for the skin usually has many steps, and it also has the advanced effect in the vertical direction. The makeup function of cosmetics is mainly realized through color makeup products. The completion of the makeup of the whole face usually requires five steps: bottom makeup, fixed makeup, cosmetic, eye makeup and lip makeup, and each step involves supporting products with different functions; 3) Emotional attributes: human beings naturally have the anxiety of aging and the desire for beauty. Cosmetics do business around these two pain points. Cosmetics have emotional attributes in essence. There is no standard for beauty, which cannot be verified or falsified. The value and aesthetics of different customer groups are different. The definition of beauty usually has strong subjectivity. Consumers can meet their own feelings, obtain a sense of pleasure and enjoy their own spiritual reward in the process of using cosmetics.
The growth path of collectivization of cosmetics companies can be disassembled into the progressive development of large single product – Product Pipeline – single brand – Multi brand. Specifically, at each step, the popular products can be precipitated into large single products through continuous marketing investment and minimally invasive concept. Then, the large single products can expand the product pipeline through category upgrading and category connection. The product pipeline with medium and high prices can establish the high-end brand tone by shaping scarcity, while the product pipeline with medium and low prices can deepen the popular tone of the brand by improving universality. Finally, the company can through endogenous incubation Build a multi brand matrix by means of extension acquisition or agency to realize group development.
The driving forces of valuation switching of cosmetics enterprises include changes in future performance expectations and changes in external industry conditions. On the one hand, the future performance trend can be predicted through two dimensions: the growth of existing brands (usually measured by the growth of main brands) and the marginal contribution of new brands; On the other hand, in addition to the fundamental impact of cosmetics enterprises on valuation switching, the industry caused by external conditions β Changes will also have an impact on the valuation. For example, under the new cosmetics regulations, long tail brands are eliminated and the industry is cleared, and leading enterprises are expected to improve their concentration by virtue of their own capital, management, supply chain and other advantages, thus driving the valuation of cosmetics enterprises to rise.
The core of the valuation premium of cosmetics enterprises is the certainty of the growth of medium and high-end brands and the scalability of category boundaries. The certainty of the growth of medium and high-end brands brings high profit release force, and the volume of enterprise revenue expands steadily under the extension of category boundary. Both factors constitute the ability of cosmetics enterprises to digest the valuation, so that the valuation level of cosmetics enterprises is often in a premium state during the expansion period, and the degree of premium is determined by track space, enterprise positioning and enterprise operation ability.
Investment suggestion: Based on the “1 + n” model of cosmetics enterprises and through three-dimensional analysis of the reasonable valuation of local enterprises, we believe that Proya Cosmetics Co.Ltd(603605) is the most powerful prototype of the group and enjoys the highest valuation premium. We mainly recommend Proya Cosmetics Co.Ltd(603605) , followed by Yunnan Botanee Bio-Technology Group Co.Ltd(300957) , Bloomage Biotechnology Corporation Limited(688363) .
Risk tip: repeated outbreaks lead to weak terminal demand; Industry competition intensifies; The launch speed or effect of new products is lower than expected; The incubation of new brands is not as expected; Companies outside China are not fully comparable.
