Northeast: Value in the medical aesthetics industry chain is shifting downstream; domestic beauty brands prioritize brand building.

Northeast released a research report stating that the downstream medical aesthetics institution segment benefits from expanded upstream supply combined with standardized industry regulation. The core growth DRIVER for the upstream medical aesthetics segment comes from new product pipeline iteration, and companies with differentiated pipeline reserves or products in a volume ramp-up cycle have stronger earnings certainty. With the rise of domestic trends, domestic brands with quality-price ratio advantages are gradually gaining consumer favor. Northeast's main views are as follows: The beauty care index gradually stabilized after a volatile decline, with overall performance weaker than the broader market The beauty care index showed a volatile trend in 2026Q1. In 2026Q2, affected by capital preferences, it declined significantly; from Q3 to date, it has gradually stabilized amid volatility. Medical aesthetics: "volume up, price down," penetration rate improvement is the main DRIVER, and industry chain value is shifting downstream to institutions (1) Supply side: product expansion has intensified competition, and strengthened regulation is driving non-compliant capacity out of the market. There are already 21 domestic regenerative material products, 10 recombinant collagen injection products approved, and 8 botulinum toxin products approved, with approval numbers clearly accelerating, bringing supply-side expansion to the industry. In addition, in 2026, Lepu Medical Technology's PDRN injectable is expected to obtain a Class III medical device certificate. The product side of the medical aesthetics industry continues to expand, with increasingly abundant supply. (2) Demand side: penetration rate improvement is the main DRIVER, and the increase in institutional chainization rate is reshaping bargaining power in the industry chain. China's medical aesthetics market is still in an early growth stage, with penetration lower than countries such as Japan and South Korea. Benchmarking against Japan's penetration rate, the number of medical aesthetics service users in China still has room to double. Benefiting from strict regulation and industry consolidation, the chainization rate of medical aesthetics institutions has increased. Chain institutions have large centralized procurement volumes, raising their bargaining power in the industry chain. Cosmetics: channel dividends weakening, category growth diverging (1) Mass-market domestic brands are rising, mid-to-high-end domestic brands remain weak, and cosmeceutical products show the best growth momentum. (2) In the skincare market, leading players' market share is stable, and domestic brands still need to upgrade toward high-end. The growth rate of the color cosmetics category is better than the overall beauty care market, and the competitive landscape for domestic brands is stabilizing. MAO GEPING, Carslan, and Florasis firmly hold the top three domestic brand positions. (3) The baby and child care market is still in an expansion stage. In 2025, the market size reached RMB35 billion/+7.5%. Domestic brands rely on localization advantages, complete supply chains, and production systems to break through with extreme cost-effectiveness. (4) Online traffic dividends for cosmetics continue to peak, selling expense ratios are rising, and the gross profit-to-selling expense spread continues to narrow. Risk warnings: consumption recovery falling short of expectations; new product pace falling short of expectations; stricter industry regulation; performance forecasts and valuation judgments falling short of expectations.