Proya witnesses 42% increase in net profit YOY

HANGZHOU,China,April 24,2023 -- Leading Chinese beauty and personal care company Proya Cosmetics Co.,Ltd. (603605.SH) recently released its financial report for 2022. During the reporting period,the company recorded revenue of 6.385 billion yuan,a year-on-year increase of 37.82%. Net profit attributable to the parent company stood at 817 million yuan,up by 41.88% over a year before. Proya has achieved double-digit growth in terms of revenue and net profit for the last five consecutive years. The companycontinued the steady growth during the first quarter of 2023,deliveringayear-on-year revenueincrease of 29.27% and quarterlynet profit exceeding200 million yuan.

Notably,not only did the company's revenue surpass 6 billion yuan for the first time in 2022,but its main brand,Proya,also surpassed 5 billion yuan in revenue for the first time,making Proya the first one owned by a Chinese A-share market company in the cosmetics field to reach the 5-billion-yuan revenue milestone.

Supporting innovation in R&D with a 67.15% increase in R&D spend

As a listed company with skin care and make-up as its main products,Proya has prioritized independent research and development,supplemented by industry-university-research cooperation,including the Institute of Microbiology of the Chinese Academy of Sciences (IMCAS),Zhejiang University of Technology,BASF China,Ashland China,Royal DSM Shanghai,Spanish LIPOTRUE,S.Land Shenzhen Siyomicro Bio-tech,among other leading research institutions and raw material suppliers. According to the financial report,Proya's R&D expenditures on basic,applied and clinical research reached 128 million yuan,up by 67.15% year-on-year. The parent company's R&D expense ratio was 4.31%,up by 0.76 percentage points over the same period of 2021.

During the reporting period,Proya grew the R&D team to 229 employees,representing 7.21% of the company's total workforce,of which 2% have a doctorate degree and 30% a master's. Proya holds 225 patents,including 107 nationally authorized invention patents,19 utility model patents and 99 design patents. The company has also led or contributed to the formulation of 14 nationalstandards,3 industry standards,and 14 group standards.

Proya has continued to support the establishment of international scientific research centers for the study of skin texture,active ingredient design and efficacy testing. Its R&D Innovation Center remains focused on the R&D of innovative skincare and color cosmetics products. A Shanghai-based R&D center is under construction,while the Japanese R&D facility is in the final stages of preparation for its opening.

During 2023,Proya will continue to upgrade its R&D capabilities in line with its globalization strategy,attracting highly-educated,multi-disciplinary talents with a global perspective in several fields,including chemistry,chemical engineering,pharmacology,dermatology,statistics and computational biology. The company is in the process of setting up R&D laboratories and support facilities both in China and in several countries where it markets its products. Proya also plans to optimize every stage of the production cycle,from consumer and technical insights to technology improvements,raw material sourcing,formulations,product development and efficacy evaluation. Moreover,the company will also expand its strategic partnerships with global industry-leading institutions focused on biotechnology,life sciences,cellular biology,dermatology and other disciplines.

Building a multi-brand portfolio based on the company's "6*N" strategy

According to China's National Bureau of Statistics,the country's total retail sales of consumer goods reached 43,973.3 billion yuan in 2022,down by 0.2% year on year,of which,393.6 billion yuan was for cosmetics,down by 4.5%. Proya has been formulating a new approach that it has dubbed its 6*N strategy,which will strengthen its core competencies,improve its brand structure,and determine a successful growth path amidst the ever-changing external market environment.

With a deep understanding of consumer expectations,Proya has continued to use its R&D resources to build and optimize its core "hero product" portfolio strategy. Proya,the company's flagship brand targeting the young white-collar female market,recorded steady sales growth of 37.46% to 5.264 billion yuan in 2022,accounting for 82.74% of the company's total revenue. With a focus on digital management throughout the whole product lifecycle,the Proya brand has added new product categories to its Elastic Brightening,Deep Ocean Energy,and Advanced Original Relief collections,rolled out some new formulations,including Advanced Original Relief Cream and Advanced Original Relief Mask,and updated existing products with 2.0 versions of Elastic Brightening Youth Activating Eye Cream,Proya Deep Ocean Energy Wrinkless and Firming Eye Cream,and Proya Advanced Original Relief Concentrating Essence. The efforts further consolidated the strength of the three collections. The brand has also continued adding to its high-end product lines with the launch of Inaugurating Nourishing Face Oil. In 2022,the Proya brand set a record on the Tmall platform by ranking first in the essence category,fourth in the face mask category,fourth in the eye cream category,and ninth in the cream category.

Proya hero product items

Proya's second-tier brands,TIMAGE,Off&Relax (OR) and Hapsode,achieved triple-digit sales growth and profitability in 2022. TIMAGE continued to expand its facial makeup product portfolio and enhance its reputation as a professional cosmetics brand for makeup artists. The brand generated sales of 572 million yuan last year,up by 132.04% year on year,accounting for 8.99% of the company's total sales and establishing itself as Proya's next best performer in terms of growth. In 2022,TIMAGE Tricolor Light & Shadow Blending Palette and Reshape Youthful Face continued to maintain their leading positions on the Tmall platform,ranking first and second respectively in the highlights category. In addition,the brand's primer placed first in the Tmall isolation/pre-makeup category. The newly launched Tricolor Harmonize with Skin took the top spot in Tmall's concealer category,while the new Light-Mist Setting Spray entered the platform's Top 10 Setting Sprays list.

TIMAGE hero product items

The scalp care brand,Off&Relax,(OR) and the oily skin cleaning brand Hapsode have both quickly developed hero products star single products and now offer wide-ranging product portfolios targeting multiple consumer groups.

Off&Relax hero product items

Hapsode hero product items

On the heels of the rebound on the domestic economy and changing consumer expectations when it comes to cosmetics,Proya succeeded in creating a blueprint of how a cosmetics maker in China can make the shift from channels to hero product items. Yet,Proya's opportunities and growth potential are much more than that. The company is supporting the rapid and steady growth of its key brands,while building on its successful practices and core capabilities based on the long-term application of the 6*N strategy,with the goal of creating and then enhancing a multi-brand portfolio through global R&D and technological innovation. The intent of the strategy is to create a complete industrial platform for the new domestic cosmetics sector. All eyes are on Proya to see what kind of ground-breaking growth the company can achieve in the future.