Guotai Haitong: The overall performance of the beauty industry in Q1 remains strong, and the sector's valuation is gradually entering the buying zone.

Guotai Haitong released a research report stating that in the first quarter of 2026, the social zero/online GMV growth of the beauty industry increased by 6% and 7% year-on-year, with outstanding performance in cosmetics and hair care, while skin care faced pressure. Foreign-funded high-end brands are showing signs of recovery. The valuation of the beauty and skincare sector is gradually entering the hitting zone, and attention should be paid to the performance of major promotions in the second quarter. Looking ahead to 2026, the beauty and skincare market is expected to continue to grow steadily, as the sector has many product innovations, high efficiency in domestic organization, and a long-term rising trend. It shows clear growth attributes, and it is recommended to select products and brands with stronger energy and high-growth potential from the bottom up, as well as targets with repair elasticity under product and channel changes. It is recommended to increase holdings in: 1) high-growth targets with strong fundamentals; 2) targets with improved fundamentals.