Zhongjin: The narrative logic of the light industrial retail beauty industry is shifting from "expansion" to "improvement in quality", focusing on three main lines.

CICC released a research report stating that looking ahead to 2026, with consumers' continued pursuit of emotional and functional value, industry supply upgrades, and supportive consumer policies, the narrative logic of the light industry retail beauty industry is transitioning from "expansion" to "quality improvement." Investments should focus on three main directions: emotional consumption, fundamentals reversal, and industrial transformation catalyzed by new technologies. Trend Analysis for 2026: Supply improvement and demand upgrade. Demand side: CICC identifies four major demand trends in the light industry retail beauty industry, namely the continued prosperity of emotional consumption, the coexistence of rational consumption and high-end recovery, the dominance of functional demands, and the continuous rise in the preference for domestic products, all closely related to demographic structure and generational shift; Supply side: we also observe three types of supply innovations: "creating new categories" such as exploring and satisfying consumers' emotional needs in trendy categories, "developing new functionalities" such as upgrading the effectiveness of beauty and personal care products to stimulate demand, and "integrating new technologies" such as AI glasses, AI toys, etc., with these three innovations representing the improvement and upgrade of industry supply. Policy side: current consumer support policies focus on building a systematic and long-term mechanism, providing support and transformation around three main dimensions of consumer subjects, product quality improvement, and scene optimization, with industries such as AI+ and elderly care and childcare expected to continue benefiting. Industry Outlook for 2026: Beauty and medical beauty: CICC predicts that the growth of this sector in 2026 will be more driven by the supply side, with structural opportunities brought by innovations in components like PDRN and upgrades in functionalities, and domestic leading companies are still expected to increase their market share. Trendy retail: CICC believes that trendy categories will continue to be highly prosperous globally, with ongoing innovation in leading categories and products, deep operation of IPs, and channel upgrades expected to create new growth opportunities. Light industry manufacturing: we believe that the industry will see a weak recovery in demand but still offers structural opportunities, with optimism for export-oriented companies with capacity and brand advantages, as well as companies seizing opportunities in industrial transformation to develop new businesses and revitalize growth. Investment strategies for 2026 revolve around three main themes: first, maintaining long-term layouts for emotional and self-gratifying consumption areas such as trendy products, beauty and personal care, and new tobacco products; second, focusing on industrial revolution and investment opportunities catalyzed by new technologies such as AI+; and third, actively positioning in stimulus policies and fundamental turnaround opportunities, which may bring a boost to traditional sectors.