Cathay Pacific Haitong: The diversification of the Q3 beauty care sector intensifies, and the value of growth allocation is highlighted

The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that the 26Q3 beauty care sector's revenue/attribution/deduction was not +10%/-36%/-29%, sector differentiation intensified, personal care was steady, high-end beauty was better than the general public, and the downstream medical and aesthetic sector growth attributes were still obvious. Currently, sector valuations and positions are low. It is recommended to select targets with strong energy and resilience to repair. Recommended: 1) high-growth targets with strong fundamentals; 2) leading targets with low valuations; 3) targets with low expectations and margins expected to improve in the future.

Cathay Pacific Haitong's main views are as follows:

26Q1-3 Cosmetics Co., Ltd. grew 6.1% year on year. The channel growth rate converged, and the high-end was better than the public. From January to September 2026, the cosmetics company's zero cumulative year-on-year ratio was +6.1%, a slight decrease from H1. On a monthly basis, retail sales of cosmetics above the limit in July, August, and September were +7%, 5%, and 5% year-on-year. By channel, mainstream e-commerce beauty sales increased 3.8% year-on-year in Q1-3, and the online and offline growth rate continued to subside. Q1-3 High-end beauty online brands have achieved high growth, and the public is under overall pressure. Some domestic brands in the makeup and care category have performed well, such as Mao Geping (makeup GMV about +49%), Tilly, Huazhixiao, Perrimax, and Off&Relax, etc., which recorded high growth rates.

Beauty care sector 26Q1-3 revenue/ -10%/-9%, 26Q3 revenue/ -10%/-9%, 26Q3 revenue/mother/ deduction was not +10%/-36%/-29%. The personal care segment was better than cosmetics and medical beauty. Excluding Hong Kong stocks, the total revenue of the beauty care sector in 2026Q1-3 was 48 billion yuan, up 8% year on year, net profit to mother of 5.6 billion yuan -10%, deducted non-net profit of 4.3 billion yuan -9% yoy, and 26Q3 revenue, -36%, and -29% year-on-year respectively. The rapid revenue growth was mainly driven by high growth in the personal care sector and the beauty sector combined with Perea. By sector, the Q3 segment of the personal care sector saw revenue +29% year-on-year increase, 25% year-on-year increase after deducting non-profit, and maintaining excellent business quality. Benefiting from product innovation and balanced channel expansion, if Yu Chen, Runben, and Dengkang can all maintain rapid double-digit growth, Lafon Jiahua reverses year-on-year losses. The overall profit of the cosmetics sector was under pressure, and individual stocks were further divided. Shanghai Jiahua, Huaxi Biotech, and Shuiyang shares improved at a low base. In addition, high-end beauty Mao Geping's Q3 revenue and profit increased by a double 22% +, showing the resilience of high-end brands. Upstream product manufacturers in the medical and aesthetic sector are under pressure due to increased product supply and profit margins. Downstream institutions benefit from the redistribution of value in the industrial chain, driving improved profitability.

Overall sector positions and valuations are low, and growth allocation value is prominent. The average value of positions held in the Q3 sector was 2%, down from both 26Q1 and 25Q3. As fundamental differentiation intensified, position structure differentiation was significant. The current sector's multiple targets correspond to PE between 10-25x and PEG within 1 in 2026; the overall PE of personal care is between 20-30x, and the growth expectations of personal care are relatively stable and the performance resilience is strong under multi-business/multi-channel expansion; the PE valuation of medical and aesthetic A-shares is around 20x. Considering that multiple stocks are still growing, the current allocation value is remarkable.

Risk warning: Industry prosperity is declining, brand competition is intensifying, and new product incubation falls short of expectations.