英文【高盛】中国化妆品2024-2025年第一季度总结需求企稳与竞争态势；年初至今的重估已反映在中期周期中；买入巨子生物、上海家化

Echoing our 2025 outlook, the China beauty sector showed signs of bottoming in 4Q24, followed by an improved 1Q25 as demand turned from negative yoy to flattish and competition became more rational, as witnessed during Womens’ Day. In particular, 1Q25 onshore sales growth re-accelerated at 3.2% yoy above GSe of full year onshore demand of 1.2% yoy, though this was offset by the lagging DFS channel down 23%/11% yoy for Korea/Hainan respectively (vs. GSe full year offshore beauty demand of 2.9% yoy growth). This explains the outperformance of the beauty sector YTD despite less exciting results (31% price index up vs. MSCI China 12%) driven by a 50% rerating (12m PE from 20x downcycle valuation to 30x) and the earnings base rolling over to 2025, while 2025E earnings have been revised down by 11% YTD on average, per BBG consensus. Our covered China cosmetics companies’ 2024/1Q25 results were a mixed bag - sales missed across the board (except Giant Biogene) yet selective names (i.e. Proya/Jahwa) managed to beat at the bottom line on strengthened cost management. ROI continues to trend down yoy measured by GPM - Selling expenses ratio down 6.8ppt/3.7ppt yoy in 4Q24/1Q25 on average (excl. Proya achieving yoy expansion through logistics and packaging savings). We highlight three key debates on the sector from recent conversations with investors 1. Any changes in competition narrative between local vs. global as some local leaders’ growth seems to have slowed down? GS view: We note local share gain remains intact but share gainers are shifting to emerging leaders on products/brand upcycles, including Giant Biogene/Marubi/Chicmax/MGP at still 30%+ sales growth, and aiming to sustain a 20-30% CAGR in 2-3 years. In particular, as identified in our 4Q24 MNC read across and initial evidence from Womens’ Day, global names started to pull back promotions from this year to focus on quality growth/profitability, leaving further room for local brands to turnaround, including names such as Shanghai Jahwa. On top of this, we saw premiumization efforts accelerate in 1Q25 echoing our view Cathy Chen, CFA +852-2978-6621 | kaiqi.chen@gs.com Goldman Sachs (Asia) L.L.C. Mia Gu +852-2978-6973 | mia.gu@gs.com Goldman Sachs (Asia) L.L.C.China Cosmetics 2024/1Q25 wrap: Stabilizing demand and competition; YTD rerating priced in mid-cycle; Buy Giant, Jahwa8 May 2025 | 1:15AM HKT Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S. of ample white space for local share gain in the