Futu Securities reported that with the rise of the quality to price ratio of domestic products, the popularity of affordable consumer goods, and the increase in market penetration, good news for large single products with strong stickiness and diversified channel layout of top-notch domestic products. The medical beauty industry will continue to benefit from rich product supply on the supply side and maintain healthy development of industry norms. Key recommendations: SHANGHAI JAHWA UNITED (02145), JOYSBIO (02367), IMEIK TECHNOLOGY DEVELOPMENT (300896.SZ), PROYA COSMETICS (603605.SH), GUANGDONG MARUBI BIOTECHNOLOGY (603983.SH), LUSHANG FREDA PHARMACEUTICAL (600223.SH); Suggestions for attention: SYOUNG GROUP (300740.SZ), JIANGSU WUZHONG PHARMACEUTICAL DEVELOPMENT (600200.SH), HUADONG MEDICINE (000963.SZ), SHANGHAI HAOHAI BIOLOGICAL TECHNOLOGY (688366.SH), BONMED LIFE SCIENCE (300957.SZ), BLOOMAGE BIOTECHNOLOGY CORPORATION LIMITED (688363.SH), SHANGHAI JAHWA UNITED (600315.SH).

Shenwan Hongyuan's main points are as follows:

Cosmetics: Top domestic products lead the growth of the industry, and market share continues to rise.

From the beginning of the year to the present, the demand side has steadily recovered, and the social and retail sales growth rate of cosmetics from January to May saw a YoY increase of 5.4%. The value of SW beauty care has decreased by about 7% from February 7 to July 5. The growth performance of the top domestic beauty care brand is strong, and its market share continues to rise. 1) The growth rate of top domestic beauty care brands in H1 2024 has comprehensively surpassed international brands. 2) International groups have slowed down in China, and they continue to release market space, while domestic products actively take over to improve the competition pattern. The failure of the three major international beauty companies in the Chinese market in 23 years has shown that they have lost their edge in various dimensions and released market space, which verifies the rise of domestic products.

Medical beauty: Upstream injection manufacturers continuously proactively launch new products, and the stimulation of diversified supply stirs up terminal demand.

The demand side has been maintaining steady growth in the long-term due to the increase in market penetration, the popularization of consumer education and the sustained pursuit of beauty. The short-term logic is that the variety of products has increased, becoming more cost-effective, and there is a trend of strict compliance to clear out "grey products". Consumption is focusing on the top brands with strong capabilities. There is a trend of increasing light medical beauty projects with high stickiness, high frequency, and low unit price, making the supply side a rapidly developing sector. IMEIK Technology Development is improving its research pipeline, while HUADONG MEDICINE and JIANGSU WUZHONG are developing cross-border partnerships, HAOHAI BIOLOGICAL TECHNOLOGY is seeking to seize the high-end national market for domestic products, JOYSBIO and JINBO Biotechnology are adding color to the pharmaceutical field with recombinant collagen technology. The prosperous supply and demand sides are boosting attention and consumer preferences for the medical beauty market.

24Q2 Prospects for the cosmetics segment:

PROYA COSMETICS: The company is expected to achieve a YoY revenue increase of about 40% and a YoY net income increase of about 38% in 24Q2. According to the company's battle report, during the 618 promotion, PROYA COSMETICS' main brand was ranked first on Tmall and Douyin's beauty industry. The upgrade of brands+ incubation of color cosmetics, the export of popular categories to the masses and the preparation for the burst of hair products, together safeguard the company's cross-industry prosperity.

SHANGHAI JAHWA UNITED: According to data from QYER, HANSHUO's Douyin channel GMV was nearly 3.45 billion in the first half of 24H1 and the brand's momentum is rising, while the overflow of platform traffic is helping Tmall and the sub-brand cultivation is booming. It is expected that the revenue growth rate in 24H1 will be approximately 140%, and the profit growth rate will exceed 300%.

JOYSBIO: The recombinant collagen protein market is hot, and it has helped the company's brand and category to develop rapidly. It is expected that the revenue growth rate in 24H1 will be about 43%, and the profit growth rate will be nearly 33%.

GUANGDONG MARUBI BIOTECHNOLOGY: A veteran player in the collagen protein market. Successfully transformed online channels in 23 years. Color cosmetics category continues to sell well. It is expected that the 24Q2 revenue growth rate will be close to 32%, and the net profit growth rate will be over 40%.

LUSHANG FREDA PHARMACEUTICAL: With the dual brands, dual platforms, Aierbo Doctor brand upgraded to meet the needs of middle and high-end customers, and Yilian enjoys high cost-effectiveness consumer dividends. Affected by the divestment of real estate business, the expected revenue growth rate in 24Q2 will decline by 8%, while the net income growth rate will remain the same at 50%.

BONMED LIFE SCIENCE: 24Q2 performance is expected to improve marginally, with a large volume of offline channels. Against the relatively low base period in 23 years, it is expected that the revenue growth rate in 24Q2 will be about 16%, and the net profit growth rate will be the same as that in 23 years.

BLOOMAGE BIOTECHNOLOGY CORPORATION LIMITED: It is expected that the revenue/net profit growth rates in 24Q2 will slightly decline.

SHANGHAI JAHWA UNITED: It is expected that the revenue/net profit growth rates in 24Q2 will be around 5%.

24Q2 Prospects for Medical Beauty Segment:

Imeik technology development: It is expected that the company's revenue and net income attributable to shareholders will both increase by 8% in Q2 2024. The same period last year had a relatively high base, which has an impact on the growth rate performance of Q2 2024. "Twin Angels" complement each other and quickly gain competitive advantages in the same category. Botulinum toxin certification is imminent, and there are many highlights to look forward to in 2025 and beyond.

Lancy Co.,Ltd.: It is expected that the company's revenue/ net income attributable to shareholders will increase by 10% in Q2 2024. Strong ability in external incubation, and it is expected that after the maturity of the external double-digit medical beauty institutions, they will be gradually incorporated.

Risk warning: Macro uncertainty intensifies; changes in market demand; intensifying industry competition; recovery falls short of expectations.