Zhongjin: In 2025, the focus of American investment in China will be on the structural opportunities brought by the rise of domestic products and the optimization of the market.

CICC released a research report stating that the overall demand in the US beauty and personal care industry is expected to be under pressure by 2024. With intensified brand competition and the slowing down of channel dividends, operating costs are rising, and gross sales differentials are declining, leading to further differentiation in the market. Looking ahead to 2025, the bank expects the demand side to benefit from factors such as the recovery of terminal consumer power, and all sub-sectors of the beauty and personal care industry are expected to see growth rebound on a low base, with cosmetics and personal care showing stronger resilience, and medical aesthetics having better elasticity. The concentration of top players on the supply side is increasing, and the rise of domestic brands is expected to continue. The bank recommends focusing on the structural opportunities brought about by the rise of domestic brands and the optimization of the market layout in the beauty and personal care industry in 2025. Key points from CICC: Cosmetics: The trend of intensified differentiation, increased concentration, and the rise of domestic brands is expected to continue. The overall cosmetics market shows strong resilience, and the bank expects it to stabilize and improve in 2025, driven by the recovery of domestic demand. In terms of market dynamics, increased industry competition and declining gross sales differentials will drive market share towards top brands. Foreign brands have seen a short-term comeback in market share since 3Q24, but some may struggle to maintain their position due to damaged pricing and brand strength, while leading domestic brands have rapidly improved their technological research and development capabilities, brand building, and channel operations. The bank is optimistic about the further increase in market share of domestic companies with outstanding brand and product advantages, leading in the development of emerging ingredients such as collagen. Medical aesthetics: The implementation of consumption promotion policies is expected to release demand elasticity, while the continuous enrichment of new materials on the supply side. The prosperity of the medical aesthetics industry is closely related to residents' income levels. The bank believes that the industry's demand recovery in 2025 will have considerable elasticity, and the introduction of new products on the supply side is likely to stimulate consumer demand. In terms of market dynamics, institutions are more willing to promote new products for profit, and the increase in licensing supply poses a higher challenge to the product positioning, brand marketing, channel empowerment, and control capabilities of pharmaceutical and medical device manufacturers. Companies with forward-looking pipeline layouts, leading certification capabilities, and excellent market promotion capabilities in the pharmaceutical and medical device sector are expected to outperform. Personal care: The increase in online penetration rates and the rise of self-indulgence demand bring opportunities for market restructuring. The bank expects that the self-indulgence trend in 2025 will continue to drive the product structure of the personal care sector towards more efficacy-oriented and high-end upgrades. At the same time, the increase in online penetration rates will help domestic brands expand their market share through content marketing. The bank is optimistic about the rising opportunities for domestic brands in niche segments such as infant and child care, feminine hygiene products, oral care, and household cleaning. Looking ahead to 2025, the bank is positive about the excess growth opportunities in high-quality niche segments of the beauty and personal care industry, as well as the continued rise of domestic companies. It recommends focusing on three main themes: 1) blue-chip companies with excellent quality and reasonable valuation returning to a growth trajectory; 2) high-growth targets with core products/brands still at the expansion stage; 3) opportunities for bottom reversal driven by internal management improvements, external expansion, and valuation recovery. Risk warning: Increased industry competition, industry regulatory policy risks, and fluctuations in raw material prices.