Zheshang: Cosmetics revolve around valuation switching and Double 11 catalyzing. Medical beauty Q4 new products are expected to be approved, bringing catalysis.

Zheshang released a research report stating that it is expected that new consumer brands of cosmetics, with product upgrades and brand building, will maintain a compound annual growth rate of 20%-30% in revenue and profit over the next 2-3 years. The attractiveness of the market outlook and certainty remain strong. Performance in Q3 was stable during the off-season, and with the catalyst of Singles' Day in Q4, marginal improvement is expected. Especially top brands are expected to have a significant synergetic effect during promotional periods, leading industry in terms of revenue and profit performance. New products in the medical beauty sector are expected to be approved in Q4, bringing catalytic effects. Key points from Zheshang: Cosmetics Market conditions: Retail sales of cosmetics in the quota category in July and August 2025 increased by +4.5% and +5.1% year-on-year, continuing steady growth. Looking at Q3 performance, the off-season was slow, with some companies experiencing weaker revenue growth month-on-month. Considering the pre-fronting of costs for Singles' Day and rising traffic costs, it is expected that the profit performance of the sector would not be as good as the revenue performance. The bank expects that MAO GEPING and CHICMAX will lead the industry in terms of performance, Proya Cosmetics will see single-digit growth in revenue and profit, Shanghai Jahwa United's online growth is impressive, SYoung Group is expected to continue its low double-digit growth trend in revenue from Q2, turning profit. Looking ahead to 4Q25, without any significant new flow of traffic, product categories or channels, demand in the beauty industry is expected to stabilize, with the overall market expecting low single-digit growth. Industry insights: The marginal effect of influencers is weakening, brands are focusing more on the certainty and continuity of traffic The limitations of rising costs of influencer marketing and uncertain conversions are gradually emerging, testing brands' ability to self-promote. Marketing strategies have undergone significant changes: relying on influencer marketing to a renaissance of the celebrity endorsement model. The "new" celebrity endorsement model is more flexible, lightweight in operation, with shorter collaboration durations (quarterly or limited marketing cycles) and refined titles (such as brand ambassadors, brand friends). It builds a matrix of endorsers (such as sports stars, popular stars, evergreen stars, etc.) to break through the circles and reinforce the brand image. Medical Beauty Market conditions: Upstream consumables products accelerate approval, intense competition, and downstream end-user institutions face challenges in customer retention and attracting new clients. The bank expects the medical beauty business of Lancy Co.,Ltd. to have a slight improvement in Q3 compared to H1, but revenue is still expected to decline by low single digits year-on-year. Industry insights: Upstream chasing innovation, downstream seeking change The growth rate of demand expansion is slowing down, and with more products such as hyaluronic acid, botulinum toxin, baby face needles, girl face needles gaining approval, competition in consumables is fierce. Consumers require new materials to drive demand, and it is recommended to focus on new products with licensing advantages, looking at the potential of PDRN new materials. Downstream Neo exploring the "Sam's Club" model for medical beauty, future focus will be on replicating the chain from first-tier cities to second and third-tier cities and increasing the proportion of self-supplied products. Risk warning Intensified industry competition, marketing investment conversions falling short of expectations, and delays in new medical beauty product approvals.