Overview

Shanghai Jahwa is one of the oldest personal care and cosmetic product companies in China, mainly engages in the research and development, design, production, sales and service of cosmetics, personal care and household care products. The company has a complete brand matrix, including Herborist, GF, MAXAM, Giving, Liushen, HomeAegis, etc. The company covers the needs of different ages and consumer groups with differentiated brand positioning, and continuously innovates products. It currently has a good reputation in China.

Performance review

In 2024, the company's operating revenue was 5.68 billion yuan (RMB, the same below) with a year-on-year decrease of 13.93%; the net profit attributable to the parent company was -833 million yuan with a year-on-year decrease of 266.60%; the net profit attributable to the parent company after deducting non-recurring gains and losses was -838 million yuan with a year-on-year decrease of 366.41%; EPS was -1.24 yuan with a year-on-year decrease of 265.33%. The company's loss was mainly due to the sharp decline in overseas business revenue, which was caused by the low birth rate overseas, the intensified competition in the infant and children product industry and the reduction of inventory by dealers, the implementation of strategic adjustments and the reduction of investment revenue. In 2025Q1, the company's operating revenue was 1.70 billion yuan with a year-on-year decrease of 10.59%; the net profit attributable to the parent company was 217 million yuan with a year-on-year decrease of 15.25%; the net profit attributable to the parent company after deducting non-recurring gains and losses was 192 million yuan with a year-on-year decrease of 34.49%; EPS was 0.32 yuan with a year-on-year decrease of 15.79%. The main reasons for the decline in performance were the company's adjustment of Liushen's price strategy this year, which delayed the offline dealers` purchase rhythm, but did not affect the overall demand; at the same time, the pipeline inventory and non-strategic cooperation brands were further optimized, the revenue of related businesses decreased year-on-year, and the gross profit decreased year-on-year.

Profitability is under pressure in the short term, and operation quality has been improved

In 2024, the company's gross profit margin was 57.6% with a year-on-year decrease of 1.37pct; the net profit margin was -14.67% with a year-on-year decrease of 22.25pct, as mentioned before, mainly due to the company's goodwill impairment, strategic adjustments and reduced revenue. The sales expense ratio was 46.69% with a year-on-year increase of 4.71pct; the general and administrative expense ratio was 10.74% with a year-on-year increase of 1.4pct; the R&D expense ratio was 2.66% with a year-on-year increase of 0.44pct. Inventory was 673 million yuan with a year-on-year decrease of 13.34%, mainly due to the decrease in the company's raw material procurement, product production and inventory; accounts receivable were 771 million yuan with a year-on-year decrease of 34.25%, mainly due to the company's implementation of strategic adjustments (including the department store channels actively reducing social inventory and closing stores, resulting in reduced invoice income, and the online dealers` agency mode switching to a self-operated mode resulting in returns); operating cash flow was 273 million yuan with a significant year-on-year increase of 164.89%, mainly due to the high cash paid to relevant personnel for the exercise of equity incentives in the previous year and the strategic adjustment, resulting in a year-on-year decrease in the net amount of sales cash after deducting purchase and service cash payments.

In 2025Q1, the revenue of online business and beauty business both achieved double-digit growth year-on-year, and we expect the company’s performance to be improved significantly in 2025

In 2025Q1, the company's online business and beauty business revenue both achieved double-digit growth year-on-year. The company's online and offline businesses performed better. The GMV of the self-broadcasting business of multiple brands such as Dr.Yu, Liushen, Herborist and Giving on the Douyin platform had achieved triple-digit growth. During the March 8th promotion of the special session of influencer live delivery of Liu Yuanyuan, the volume and profit of Herborist increased significantly, and the online business had achieved triple-digit growth year-on-year. Offline, the company had gained 100+ new customers as strategic partners, actively expanded emerging channels, and reached the terminal more efficiently with active promotion plans, gaining nearly 40,000 new stores in the first quarter and double-digit growth in sales of emerging channels. We expect the company will get good performance in 2025.

Strengthening R&D layout to boost brand influence

As of the end of 2024, the company had obtained 455 authorized valid patents with a significant year-on-year increase of 55%, effectively consolidating the company's leading layout in the field of R&D technology. The company focuses on the research of Chinese herbal medicine, from the theoretical research of Chinese medicine and cosmetology, extraction of effective ingredients, professional verification platform to independent production, and finally maximization for the efficacy of Chinese herbal medicine, gradually forming its own differentiated competitive advantages. In 2024, the company successfully completed the filing of 3 new cosmetic raw materials (Naematelia aurantialba, Cyclocarya paliurus, and Nervonic acid), achieving a breakthrough in new raw materials. The company cooperated with the top domestic Chinese herbal medicine research institution to establish the “Institute of Shanghai Jahwa& Chinese Materia Medica China Academy of Chinese Medical Sciences” to promote the cosmetics industry to achieve new breakthroughs in the research and application of Chinese characteristic plant raw material technology. The company has five self-owned factories, of which the capacity utilization rate of the Qingpu Factory was only 23%, and there is a large room for improvement in the future, which is expected to significantly increase the output of related products. In March 2025, the Shanghai Jahwa Innovation Center-Synthetic Biology was established, marking the comprehensive upgrade of Shanghai Jahwa's R&D strategy.

Focusing on core brands and increasing market share

The company focused on the development of core brands( Liushen and Dr.Yu), actively carried out marketing promotion, and further increased market share. Dr.Yu completed a full upgrade from brand image, packaging vision, product formula to patented technology in 2025Q1. Dr.Yu focused on skin barrier repair, and at the same time entered the medical aesthetics post-repair market, occupying a place in the segmented skin care area. Liushen used technology on mosquito repellent protection and launched a new upgraded mosquito repellent egg. After listing, it topped the Douyin mosquito repellent floral water category for more than ten days.

The equity incentive plan has been implemented, which is beneficial to the company's long-term development

The company has released the 2025 employee stock ownership plan, and the number of participating employees is expected to be no more than 45; the performance assessment target is that the net profit from 2025 to 2027 will be positive/increase by no less than 10%/increase by no less than 10% respectively, and the unlocking ratio for each period is 30%/30%/40% respectively. This plan will help bind the management and core employees with the company, which is beneficial to the company's long-term development.

Investment Thesis

In March 2025, the total retail sales of consumer goods were 4,094.0 billion yuan with a year-on-year increase of 5.9%. Among them, the sales of cosmetics were 42.8 billion yuan with a year-on-year increase of 1.1%, showing a good growth trend in cosmetics consumption. In recent years, major domestic beauty brands have continued to exert their strength, and the entire beauty industry is undergoing a reshuffle. Although Shanghai Jahwa had suffered losses in 2024, it was still among the top ten domestic beauty brands in China. In 2024, the company experienced a change in leadership, solving historical problems and a series of strategic adjustments. The performance in 2025Q1 showed that the company was becoming better. Looking forward to the future, the company will ride the wave of continuing to promote product, brand and channel upgrades under the guidance of the "four focuses" strategy to further consolidate the competitive advantages of multi-brand matrix and full categories layout. Although the company has gained differentiated competitive advantages on Chinese herbal beauty care, the company still faces great competitive pressure in the fields of personal care and beauty area. In addition, it will take some time for the company's strategic adjustments to be fully realized. We forecast that the company's operating revenue will be RMB 6.13 billion, RMB 6.62 billion and RMB 7.02 billion in 2025-2027, with EPS of RMB 0.49/0.71/0.81, corresponding to a price-earnings ratio (P/E) of 49.8x/34.8x/30.5x respectively. We assign a target price of RMB 25.48, based on 52.0x FY2025E P/E, and give it a "Neutral" rating for the first time. (Current price as of May 12)

Risk factors

Downward macroeconomic situation, intensified industry competition, management changes, and new product promotion failing to meet expectations.

Financial

Click Here for PDF format...