26 Aug 2026 CMB International Global Markets | Equity Research | Company Update

Proya Cosmetics (603605 CH) 1H26 earnings boosted by oneoff gain; organic momentum still

Proya Cosmetics (603605 CH)

1H26 earnings boosted by one-off gain; soft organic momentum still soft

Proya's 1H26 revenue was broadly flat at RMB5,375mn (+0.2% YoY), while attributable NP rose 46% YoY to RMB1,168mn. The increase was due to a oneoff investment gain of RMB445mn on the step-up of consolidation of FlowerKnows (花知晓). Excluding the one-off gain, recurring NP fell 14% YoY to RMB664mn, with underlying net margin down to 13.9% from 15.4% in 1H25. Declining flagship-brand sales and a higher selling-expense ratio suggest the core business is still bottoming. We maintain our BUY rating and keep our 30x target P/E multiple unchanged, yet cut our TP by 31% to HK$89.58, mainly as we switch to recurring core EPS to remove one-off distortions and roll over our valuation base year to 2026E.

Target Price RMB89.58

(Previous TP RMB129.83)

Up/Downside 46.4% Current Price RMB61.20

China Consumer Staples Miao ZHANG

(852) 3761 8910 zhangmiao@cmbi.com.hk

 Soft top line and rising online traffic costs dampen organic profitability. In 1H26, Proya brand and TIMAGE, accounting for nearly 80% of revenue, fell 7% and 22% YoY, respectively. Group revenue held flat only on fast-growing but sub-scale brands (OR +71%, INSBAHA +222%). Gross margin lifted 0.9ppts YoY to 74.3% on dual sourcing, but the selling-expense ratio rose 3.5ppts to 53.1% on a higher mix of high-spend incubation brands and rising Douyin traffic costs. Compounded by a 1.1ppt rise in the adminexpense ratio, core net margin fell 2.0ppts YoY, and organic profitability has yet to trough. In the near term, a flagship recovery depends on delivery of the Ruby Cream 4.0 relaunch and the September upgrade of the Yuanli series, in our view.

Stock Data

Mkt Cap (RMB mn) 17,351.4 Avg 3 mths t/o (RMB mn) 340.5 52w High/Low (RMB) 91.99/55.37 Total Issued Shares (mn) 283.5

Source: FactSet

Shareholding Structure

Hou Juncheng 34.7% HKSCC 23.6%

Source: SSE

Share Performance

Absolute Relative 1-mth 8.8% 10.9% 3-mth 5.5% 12.0% 6-mth -14.7% -11.4%

 FlowerKnows: strategic value beyond the one-off gain. Postconsolidation, the group's online make-up share ranks behind only L'Oréal and Estée Lauder, widening its lead over domestic peers. As Proya's first controlling acquisition, the deal also adds previously untested M&A and postdeal integration capability. We view M&A as the necessary route for singlebrand-reliant Chinese beauty companies to evolve into international multibrand groups — a path on which Proya is among the front-runners. Longer term, smooth integration and portfolio build-out could support a valuation rerating toward multi-brand groups level.

Source: FactSet

12-mth Price Performance

 Valuation. We maintain BUY and keep our 30x target P/E multiple unchanged, but cut our TP by 31% to HK$89.58, on 1) switching of the earnings anchor from attributable to recurring core EPS, removing large nonrecurring items such as consolidation gain so that valuation tracks the company's organic earnings power, 2)roll-over of the valuation base year to 2026E; . The stock trades at 20x 2026E P/E, with the payout ratio at around 50%. Risks: slower core-brand recovery, traffic-cost hike, and weaker-thanexpected integration of acquired brands etc.

Source: FactSet

Earnings Summary

(YE 31 Dec) FY24A FY25A FY26E FY27E FY28E Revenue (RMB mn) 10,778 10,597 10,957 12,043 12,865

YoY growth (%) 21.0 (1.7) 3.4 9.9 6.8 Net profit (RMB mn) 1,552.0 1,497.8 1,686.0 1,405.6 1,511.2

YoY growth (%) 30.0 (3.5) 12.6 (16.6) 7.5 EPS (Reported) (RMB) 3.92 3.78 4.26 3.55 3.82 Consensus EPS (RMB) na na 4.15 4.42 4.83 P/E (x) 15.6 16.2 14.4 17.2 16.0 P/B (x) 4.4 3.9 3.7 3.4 3.1 Yield (%) 2.6 3.3 3.7 3.1 3.3 ROE (%) 31.7 25.7 26.6 20.8 20.4 Source: Company data, Bloomberg, CMBIGM estimates

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE MORE REPORTS FROM BLOOMBERG: RESP CMBR OR http://www.cmbi.com.hk

1

Figure 1: Proya’s results summary – 1H26

1H26 YoY

1H26 HoH

RMB mn 2024 2025 YoY 1H25 2H25 1H26

Revenue 10,778 10,597 -1.7% 5,362 5,236 5,375 0.2% 2.7%

by brand

Proya brand 8,581 7,689 -10% 3,978 3,711 3,692 -7% -1% TIMAGE 1,191 1,255 5% 705 550 551 -22% 0% Off&Relax 368 744 102% 279 465 477 71% 3% Hapsode 332 371 12% 166 205 175 5% -15% Insbaha 114 256 125% 97 159 313 223% 97% Other brands 180 270 50% 131 139 159 21% 14% Other businesses 13 12 -6% 6 6 8 29% 26%

by product type

Skincare and cleanser 9,019 8,182 -9% 4,199 3,983 3,910 -7% -2% Makeup 1,361 1,563 15% 837 726 897 7% 24% Body & hair 386 841 118% 320 521 560 75% 8%

Gross profit 7,695 7,764 1% 3,934 3,830 3,995 2% 4% Proya brand 6,172 5,653 -8% 2,943 2,710 2,736 -7% 1% Other brands 1,516 2,107 39% 989 1,118 1,255 27% 12% Other businesses 6 4 -30% 2 2 3 39% 77%

Selling expenses 5,161 5,259 2% 2,659 2,601 2,856 7% 10% Admin. expenses (exl.R&D) 366 404 10% 177 226 237 33% 5% R&D expenses 210 217 3% 95 122 99 5% -18%

Net profit 1,552 1,498 -3% 799 699 1,168 46% 67% Core net profit 1,599 1,500 -6% 771 730 664 -14% -9% EPS (RMB) 3.92 3.78 -3% 2.02 1.76 2.96 47% 68% EPS (RMB) - Diluted 3.92 3.78 -3% 2.02 1.76 2.94 45.5% 67% DPS (RMB) incl. shr buyback 1.57 1.99 27% 0.80 1.19 1.51 89% 27% Payout ratio (incl. shr buyback) 40% 53% 12.5 ppt 40% 67% 51% 11.4 ppt

Gross profit margin 71.4% 73.3% 1.9 ppt 73.4% 73.1% 74.3% 0.9 ppt 1.2 ppt Proya brand 71.9% 73.5% 1.6 ppt 74.0% 73.0% 74.1% 0.1 ppt 1.1 ppt Other brands 69.4% 72.7% 3.4 ppt 71.8% 73.6% 74.9% 3.1 ppt 1.3 ppt Other businesses 49.5% 36.7% -12.9 ppt 41.7% 31.8% 44.8% 3.1 ppt 13.0 ppt

Selling expenses ratio 47.9% 49.6% 1.7 ppt 49.6% 49.7% 53.1% 3.5 ppt 3.5 ppt Administrative expenses ratio 3.4% 3.8% 0.4 ppt 3.3% 4.3% 4.4% 1.1 ppt 0.1 ppt R&D ratio 2.0% 2.0% 0.1 ppt 1.8% 2.3% 1.8% 0.1 ppt -0.5 ppt

Net margin 14.4% 14.1% -0.3 ppt 14.9% 13.4% 21.7% 6.8 ppt 8.4 ppt Core net margin 14.8% 14.2% -0.7 ppt 14.4% 13.9% 12.4% -2.0 ppt -1.6 ppt

Source: Company data, CMBIGM

Figure 2: Proya’s operating matrix

1H26 YoY

1H26 HoH

Proya operating matrix 2024 2025 YoY 1H25 2H25 1H26

Vol. sold (mn unit)

Skincare and cleanser 120.2 120.6 0% 56.2 60.2 56.8 1.1% -5.7% Makeup 14.2 16.6 17% 9.1 9.2 11.8 29.5% 28.3%

• Body & hair 3.9 5.6 45% 3.0 5.0 5.5 81.9% 9.7%

Revenue (RMB mn)

Skincare and cleanser 9,019 9,027 0% 4,199 3,983 3,911 -6.9% -1.8% Makeup 1,361 1,532 13% 837 726 897 7.1% 23.5% Body & hair 386 567 47% 320 521 560 74.9% 7.5%

ASP (RMB/unit)

Skincare and cleanser 75.1 74.9 0% 74.8 66.1 68.8 -7.9% 4.1% Makeup 95.7 92.4 -3% 92.0 79.0 76.1 -17.3% -3.7% Body & hair 99.8 101.5 2% 105.5 103.6 101.5 -3.8% -2.1%

Vol. produced (mn unit)

Skincare and cleanser 119.0 124.0 4% 57.5 65.6 54.9 -4.6% -16.4% Makeup 16.6 17.6 6% 9.4 11.3 14.7 56.7% 29.7%

• Body & hair 4.5 6.8 51% 3.9 5.8 6.1 57.0% 4.8%

unit sold / unit produced

Skincare and cleanser 101% 97% -3.7 ppt 98% 92% 104% 5.9 ppt 11.7 ppt Makeup 86% 94% 8.7 ppt 97% 81% 80% -16.9 ppt -0.9 ppt Body & hair 85% 82% -3.6 ppt 78% 86% 90% 12.4 ppt 4.0 ppt

Source: Company data, CMBIGM

Figure 3: Earnings revision

Source: Company data, CMBIGM estimates

Figure 4: CMBIGM estimates vs consensus

Source: Company data, Bloomberg, CMBIGM estimates

Financial Summary

INCOME STATEMENT 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec (RMB mn) Revenue 8,905 10,778 10,597 10,957 12,043 12,865 Cost of goods sold (2,677) (3,084) (2,833) (2,849) (3,126) (3,335) Gross profit 6,227 7,695 7,764 8,108 8,917 9,530 Operating expenses (4,692) (5,821) (5,973) (6,621) (7,265) (7,748) Selling expense (3,972) (5,161) (5,259) (5,821) (6,398) (6,835) Admin expense (455) (366) (404) (477) (512) (534) R&D expense (174) (210) (217) (226) (248) (265) Others (91) (84) (93) (97) (107) (114) EBITDA 1,617 1,967 1,895 1,590 1,749 1,873 Depreciation 63 75 82 80 73 67 Other amortisation 19 19 22 22 23 24 EBIT 1,535 1,873 1,791 1,487 1,652 1,782 Net Interest income/(expense) 59 36 29 29 29 29 Other income/expense (99) (20) 50 561 50 50 Pre-tax profit 1,495 1,889 1,871 2,077 1,731 1,861 Income tax (265) (304) (328) (349) (291) (313) Minority interest 37 33 45 42 35 37 Net profit 1,194 1,552 1,498 1,686 1,406 1,511 Adjusted net profit 1,270 1,599 1,500 1,182 1,406 1,511 Gross dividends 549 622 788 887 739 795

BALANCE SHEET 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec (RMB mn) Current assets 5,545 5,613 6,136 6,500 7,208 8,037 Cash & equivalents 4,011 4,082 5,061 5,412 6,030 6,791 Account receivables 345 518 70 73 80 85 Inventories 797 661 635 638 700 747 Prepayment 203 224 169 175 193 206 Other current assets 189 128 201 202 205 208 Non-current assets 1,778 1,917 2,351 2,286 2,232 2,186 PP&E 827 907 893 813 741 675 Investment in JVs & assos 114 111 441 441 441 441 Intangibles 405 429 444 459 477 497 Goodwill 0 0 0 0 0 0 Other non-current assets 433 469 573 573 573 573 Total assets 7,323 7,530 8,487 8,786 9,440 10,223

Current liabilities 2,120 1,213 1,374 1,363 1,424 1,461 Short-term borrowings 200 0 80 80 80 80 Account payables 1,055 676 798 803 881 940 Tax payable 223 126 95 95 95 95 Other current liabilities 642 410 401 386 368 347 Non-current liabilities 803 831 847 847 847 847 Long-term borrowings 0 0 0 0 0 0 Deferred income 6 15 23 23 23 23 Other non-current liabilities 796 816 824 824 824 824 Total liabilities 2,923 2,044 2,221 2,210 2,270 2,308

Share capital 1,510 1,525 1,161 1,161 1,161 1,161 Retained earnings 3,040 4,233 4,930 5,820 6,447 7,229 Other reserves (201) (323) 125 (497) (566) (639) Total shareholders equity 4,350 5,435 6,216 6,483 7,042 7,750 Minority interest 51 51 51 92 127 164 Total equity and liabilities 7,323 7,530 8,487 8,786 9,440 10,223

CASH FLOW 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec (RMB mn) Operating Profit before taxation 1,495 1,889 1,871 2,077 1,731 1,861 Depreciation & amortization 81 94 103 103 96 91 Tax paid (265) (304) (328) (349) (291) (313) Change in working capital 140 (417) 597 (1) 9 7 Others 17 (156) (49) (566) (36) (37) Net cash from operations 1,469 1,107 2,193 1,262 1,509 1,609

Investing Capital expenditure (180) (300) (169) 0 0 0 Acquisition of subsidiaries/ investments (131) (44) (36) (37) (41) (44) Others (165) (922) (32) 0 0 0 Net cash from investing (476) (1,265) (238) (37) (41) (44) Financing

Dividend paid (407) (371) (799) (837) (813) (767) Net borrowings 0 (200) 0 (37) (37) (37) Others (53) (188) 36 0 0 0

Net cash from financing (460) (758) (763) (874) (850) (804) Net change in cash Cash at the beginning of the year 3,161 4,011 4,082 5,061 5,412 6,030 Exchange difference 1 (0) (0) 0 0 0 Others 316 988 (213) 0 0 0 Cash at the end of the year 4,011 4,082 5,061 5,412 6,030 6,791

GROWTH 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec

Revenue 39.5% 21.0% (1.7%) 3.4% 9.9% 6.8% Gross profit 39.9% 23.6% 0.9% 4.4% 10.0% 6.9% EBITDA 32.2% 21.7% (3.7%) (16.1%) 10.0% 7.1% EBIT 33.1% 22.0% (4.4%) (17.0%) 11.1% 7.9% Net profit 46.1% 30.0% (3.5%) 12.6% (16.6%) 7.5% Adj. net profit 33.6% 25.9% (6.2%) (21.2%) 18.9% 7.5%

PROFITABILITY 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec

Gross profit margin 69.9% 71.4% 73.3% 74.0% 74.0% 74.1% EBITDA margin 18.2% 18.3% 17.9% 14.5% 14.5% 14.6% Adj. net profit margin 14.3% 14.8% 14.2% 10.8% 11.7% 11.7% Return on equity (ROE) 30.3% 31.7% 25.7% 26.6% 20.8% 20.4%

GEARING/LIQUIDITY/ACTIVITIES 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec

Net debt to equity (x) (0.9) (0.8) (0.8) (0.8) (0.8) (0.9) Current ratio (x) 2.6 4.6 4.5 4.8 5.1 5.5 Receivable turnover days 14.1 17.5 2.4 2.4 2.4 2.4 Inventory turnover days 108.7 78.3 81.8 81.8 81.8 81.8 Payable turnover days 143.9 80.1 102.9 102.9 102.9 102.9

VALUATION 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec

P/E 20.3 15.6 16.2 14.4 17.2 16.0 P/E (diluted) 20.3 15.6 16.2 14.4 17.2 16.0 P/B 5.5 4.4 3.9 3.7 3.4 3.1 Div yield (%) 2.3 2.6 3.3 3.7 3.1 3.3

Source: Company data, CMBIGM estimates. Note: The calculation of net cash includes financial assets.

Disclosures & Disclaimers

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CMBIGM Ratings

BUY : Stock with potential return of over 15% over next 12 months HOLD : Stock with potential return of +15% to -10% over next 12 months SELL : Stock with potential loss of over 10% over next 12 months NOT RATED : Stock is not rated by CMBIGM

OUTPERFORM : Industry expected to outperform the relevant broad market benchmark over next 12 months MARKET-PERFORM : Industry expected to perform in-line with the relevant broad market benchmark over next 12 months UNDERPERFORM : Industry expected to underperform the relevant broad market benchmark over next 12 months

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