As the-share listed company's interim report is coming to an end, the overall performance of the beauty sector is showing a positive trend.

According to incomplete statistics from China Business News, among the 13 A- share beauty stocks, more than 70% of the companies achieved a year-on-year increase in net profit attributable to their parents in the first half of this year. However, the industry's leading stock Huaxi Bio (688363.SH) bucked the trend in the first half of 2023, and the net profit attributable to shareholders of listed companies decreased by 10.27 year-on-year.

In terms of the industry, data from the National Bureau of Statistics show that the total retail sales of cosmetics in the first half of this year broke through the 200 billion yuan mark for the first time, the highest level in history. The overall performance of the-share beauty sector also rebounded significantly. The impact of the recent pollution incident in Japan, Tianfeng Securities research report points out that the trust of Japanese makeup is facing a test, or will accelerate the process of domestic substitution.

income does not increase profits, huaxi biological net profits decline against the trend

In the first half of 2023, Huaxi Bio achieved operating income of 3.076 billion yuan, a slight increase of only 4.77 percent over the same period last year; net profit attributable to shareholders of listed companies was 0.425 billion yuan, a decrease of 10.27 percent over the same period last year. Non-net profit was about 0.36 billion yuan, down 12.69 year-on-year.

This is the first year-on-year decline in net profit since Huaxi Bio landed on the board in 2019. In this regard, Huaxi Biology said that in terms of operation, affected by weak consumption and conservative consumer purchase intentions, the optional consumer goods market represented by skin care products has been impacted to a certain extent, the flow dividend has slowed down, and the flow cost has increased. Superimposed the background that the internal organizational structure and operation management need to be further upgraded, the company took the initiative to make strategic adjustments to reduce the speed of development, resulting in a decline in sales revenue growth.

as of the close of trading on August 31, huaxi biological shares closed at 92.56 yuan. According to Tonglian data, the company's share price has plunged more than 70% relative to the all-time high of 311.26 yuan hit in July 2021; at present, its total market value is about 44.6 billion yuan.

judging from the four major business sectors of the company, the income of raw materials business and medical terminal business increased by 23.20 and 63.11 respectively, with a total income of about 1.056 billion yuan, accounting for 34.35 of the company's main business income. The revenue of functional food business segment in the first half of the year was 32.9133 million yuan, down 25.8 from 44.3658 million yuan in the same period in 2022. In addition, functional skin care business revenue is the highest segment of Huaxi Bio's main business revenue, accounting for 63.92 percent. However, in the first half of the year, the revenue of the sector was 1.966 billion billion yuan, down 7.56 percent from the same period last year, and the gross profit margin was 74.49 percent, down 4.25 percentage points from the same period last year.

according to the China Daily, Huaxi Bio's functional skin care products are mainly divided into Runbaiyan, Quadi, Mibel and BM muscle activity. The revenue of these four brands all declined year on year in the first half of the year. In the first half of the year, the income of Run Baiyan, Quadi, Mibel and BM muscle live was 0.632 billion yuan, 0.543 billion yuan, 0.217 billion yuan and 0.341 billion yuan respectively, down 2.04 percent, 10.10 percent, 16.81 percent and 29.62 percent year-on-year. In this regard, Huaxi biological explained that after 3-4 years of rapid growth of the company's four major brands of functional skin care products, the company took the initiative to slow down the development speed during the reporting period.

In addition, judging from the details of sales expenses disclosed by Huaxi Biology, online promotion service fees accounted for the highest proportion. In the first half of this year, the company invested a total of 0.712 billion yuan in this item, an increase of 51.17 year-on-year, accounting for 50.14 of the total sales expenses.%.

the beauty makeup sector rebounded, with over 70% of the company's revenue exceeding 1 billion

Although the industry leader Huaxi Bio's first-half performance was lower than market expectations, the overall performance of the beauty sector rebounded significantly, and most companies recorded growth in revenue.

specifically, the company with the fastest revenue growth is aimeike (300896.SZ), with revenue growth of nearly 65% in the first half of the year, followed by kos shares (300856.SZ), zimanzhen (600249.SH), peraya (603605.SH) and haohai shengke (688366.SH), with revenue growth of 45%, 44%, 38% and 35% respectively in the first half of the year.

There were 5 companies in the-share beauty sector with a total revenue of more than 2 billion yuan in the first half of the year. Shanghai Jahwa (600315.SH) and Perrier ranked first and second respectively. In the first half of the year, they achieved revenue of 3.629 billion yuan and 3.627 billion yuan respectively. Huaxi Bio ranked third with revenue of 3.076 billion yuan. The fourth and fifth places belong to Beitani and Shuiyang shares, with revenues of 2.368 billion yuan and 2.29 billion yuan respectively.

In terms of the industry, the fundamentals of consumption in the first half of the year have been promoted. According to the National Bureau of Statistics, in the first half of this year, domestic cosmetics retail sales totaled 207.1 billion billion yuan, up 9.46 percent year-on-year.

Minsheng Securities believes that the cosmetics industry marginal recovery, beauty industry marginal recovery, the first half of the year, in the "618" to promote the catalysis of key companies in the industry to accelerate the introduction of new products and multi-channel layout, the rise of domestic leading accelerated, significant recovery in performance. In particular, the make-up market showed strong growth in domestic products, with 70% of the TOP10 domestic products, with brands such as Hua Xizi, Kazilan and Cai Tang entering the list for two consecutive years.

The 2023 interim results released by Shanghai Jahwa showed that the company achieved revenue of 3.629 billion yuan in the first half of the year, a year-on-year decrease of 2.3; realized a net profit of 0.301 billion yuan, a year-on-year increase of 90.90; and a non-net profit of 0.262 billion yuan, a year-on-year increase 30.72%.

Shanghai Jahwa said that since the second quarter of this year, the company has adjusted its business strategy to drive the revenue growth of high-margin skin care products, which has led to the structural optimization of gross profit margin, while maintaining a steady decline in sales and management expense rates, realizing the recovery growth of domestic business.

Aimeike's revenue in the first half of the year was 1.46 billion yuan, up 65% year on year. Net profit was 0.963 billion yuan, up 65% year on year. In view of the reasons for the growth of performance in the first half of the year, Aimei mentioned in the semi-annual report that it was mainly due to the recovery of medical beauty consumer flow, the increase in consumer willingness and the continuous release of core products. In the first half of this year, Aimee's solution injection products achieved revenue of about 0.874 billion yuan, a year-on-year increase of 35.90, and a gross profit margin of 95.10; gel injection products achieved revenue of about 0.566 billion yuan, a year-on-year increase of 139, and a gross profit margin of 97.38%

In addition, Perrier achieved operating income of 3.627 billion yuan in the first half of 2023, a year-on-year increase of 38.12; net profit attributable to shareholders of listed companies was 0.499 billion yuan, a year-on-year increase of 68.21; non-net profit attributable to shareholders of listed companies was 0.479 billion Yuan, an increase of 70.49 year-on-year; Betaini's revenue was 2.368 billion yuan, an increase of 16% year-on-year, and net profit was 0.45 billion yuan, an increase of 14%.

R & D expenses increase, accelerating domestic substitution

According to the analysis of Bank of China Securities, with the recovery of consumer confidence and the further release of demand, the retail sales of cosmetics and medical beauty have gradually recovered.

it cannot be ignored that in recent years, under the trend of paying attention to ingredients in the field of domestic skin care, research and development has become the foundation of the head enterprises, and the era of light research and development and heavy marketing in the industry has long passed.

It can also be seen from the growth of R & D expenses of various listed companies in the China Daily that R & D investment is becoming more and more important.

Among them, Huaxi Bio, Bettini, Aimee, Haohai Biotech's research and development costs in the first half of the year all exceeded 0.1 billion yuan. Among them, Huaxi Bio's research and development cost of 0.187 billion yuan ranked first in the list, and Bettini ranked second in the list with its research and development cost of 0.109 billion yuan.

and the largest year-on-year increase in R & D expenses is Haohai Biotech. The company invested 0.06 billion yuan in R & D in the first half of the year, and R & D expenses increased 73% year-on-year. In addition, the first-half research and development costs of Aimee and Pereya increased by 61% and 49%, respectively.

according to the analysis of bank of China securities, as consumers become more clear about the efficacy of products and their own needs, brand differentiation increases under the background of the speed reduction of the superimposed industry, which puts forward new requirements for leading enterprises to accelerate the layout of product research and development. in the future, leading cosmetics companies need to have the dual capabilities of marketing and products at the same time, and marketing and products are indispensable.

It is also worth mentioning that, affected by the pollution incident in Japan, Japanese makeup has been abandoned by consumers, which will accelerate the growth of demand for domestic beauty brands.

Tianfeng Securities said that Japanese beauty brands were affected by nuclear pollution in the place of origin, which reduced consumers' trust in the brand and increased resistance, triggering a wave of returns, which would have a negative impact on brand and product reputation. According to Euromonitor International, the overall domestic Japanese makeup market share showed a gradual downward trend, the main Japanese group Shiseido, DHC from 2020 onwards, the 2022 fell to 3.2/0.1 percent, flower king, Gao Si 2022 city accounted for 0.8 percent, 0.4 percent. Cosmetics as optional consumption, in the future under the consideration of safety, consumers may be cautious about Japanese cosmetics. Japanese makeup trust is facing a test, a trend that will accelerate the process of domestic substitution.