PROYA COSMETICS(603605)：1H25 EARNINGS SAVED BY SUB-BRANDS; MAINTAIN BUY

　　Proya delivered 1H25 revenue and attributable NP growth of +7.2% and +13.8% YoY respectively, missing BBG consensus by 3%/4% primarily driven by sustained momentum across sub-brands and continued pressure on core brand Proya. GP margin improvement was partly offset by heavier selling expenses on 618 promotion and sub-brands marketing. The company announced HK listing plan to accelerate overseas expansion. We trim our TP by 3% to RMB129.83 to reflect lower earnings forecast, based on 30x 2025E P/E, Maintain BUY.
　　Sub-brands growth cushioned pressure of core brand. Rev. of core brand Proya dropped 0.1% YoY in 1H25 on a high base and fiercer competition. Sub-brands TIMAGE/OR/ INSBAHA sustained high growth with revenue up 21/102/80% YoY, with their combined revenue contribution lifted to 20.2% in 1H25, up 4.7ppts YoY. Looking forward, management has laid out a clear plan to enrich the product matrices across sub-brands: TIMAGE will iterate base-makeup technologies; OR will focus on anti-hair-loss solutions with aromatherapy concepts; and INSBAHA will deepen niche color cosmetics. International expansion is set to accelerate, with OR launches planned in Hong Kong and Japan and Hapsode rollout in Southeast Asia. The proposed HK listing should also provide capital and branding support to scale overseas and consolidate the company’s multi- brand advantages.
　　7M25 sales largely in line with the industry. In 1H25, offline sales dropped 21.3% YoY while online sales grew steadily at 9.2% YoY (self-operated +4.2% / distribution +25.9%). Based on our tracked cosmetics database, Proya’s GMV (covered Proya/Timage/OR) on Taobao & Douyin combined grew 4% YoY in 7M25, slightly slower than industry’s 5%.
　　Cost savings outcome partly offset by rising marketing expenses. Gross margin expanded by 3.6ppt YoY to 73.4% in 1H25 thanks to cost control efforts such us shifting freebies from “mini” to “mid-size” to reduce packaging & unit marketing costs. SG&A ratio rose by 2.6ppt YoY given heavier 618 promotions cost and celebrity endorsements for sub-brands. With 2H marketing will likely remain elevated around 11.11 shopping festival, we expect the full-year selling expense ratio to trend higher.
　　Maintain BUY. We maintain our BUY rating, with TP cut 3% to RMB 129.83, on 30x 2025E P/E. Risks: worse-than-expected consumption sentiment, intensifying competition, and raw material price hike etc.
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