Beauty Giant Proya: Pursuit of Dual Listing Faces Growth Challenges

ZC Asia has learnt that against the backdrop of a surge in Hong Kong listings within China's cosmetics sector, domestic industry leader Proya Cosmetics Co., Ltd. has formally submitted its listing application to the Hong Kong Stock Exchange, planning to list on the Main Board. Should this IPO proceed smoothly, Proya will become the first domestic beauty enterprise to achieve dual A+H share listings.

Performance growth shows signs of fatigue, with flagship brand facing pressure

According to prospectus data, Proya maintained robust growth momentum from 2022 to 2024, with revenue rising from RMB6.385 billion to RMB10.778 billion and net profit increasing from RMB831 million to RMB1.585 billion. This performance established Proya as the first Chinese cosmetics group to surpass RMB10 billion in annual sales revenue.

However, growth momentum slowed markedly in the first half of 2025. Revenue grew by 7.2% year-on-year to RMB5.362 billion, while net profit increased by 13.8% to RMB799 million – the lowest growth rate recorded over the past five years. Particularly noteworthy is the slight 0.08% year-on-year decline in revenue for the flagship ‘Proya’ brand to RMB 3.979 billion, accounting for 74.3% of total revenue. This stagnation directly impacted the company's overall performance.

Proya's success largely stems from its ‘flagship products’ and “platformisation” strategy launched in 2019. By developing star products like the Ruby Essence and Dual-Action Essence, and precisely capturing trends such as ‘ingredient-focused consumers’ and the ‘morning vitamin C, evening retinoid’ skincare routine, the company achieved rapid performance growth.

Concurrently, its multi-brand matrix built through both in-house incubation and strategic investments has yielded positive results. The cosmetics brand Caitang was successfully revitalised and has grown into a second growth curve, while skincare brand Yuefuti and personal care brand Off&Relax have also demonstrated development potential. However, these sub-brands currently remain relatively small in scale and have yet to fully offset the impact of the main brand's sluggish growth.

Broad Industry Prospects Amidst Fierce Competition

As the world's second-largest cosmetics market, China accounted for 11.4% of global market share in 2024. Industry projections indicate that between 2024 and 2029, China's cosmetics market will grow at a compound annual growth rate (CAGR) of 6.6%, approximately double the global average.

Within this growth trajectory, the ‘rise of domestic brands’ has emerged as a core driver. Heightened consumer affinity for homegrown labels among younger generations has enabled domestic enterprises like Proya to reclaim market share from international competitors. However, the company must contend not only with global giants such as L'Oréal and Estée Lauder but also with domestic rivals including Betain and Huaxi Biotech.

The prospectus reveals that in the first half of 2025, Proya's sales and distribution expenses reached RMB 2.659 billion, accounting for 49.59% of revenue. By contrast, research and development expenditure stood at merely RMB 95 million, with sales expenses exceeding R&D costs by nearly 27 times.

This phenomenon holds some prevalence within the industry. For instance, Chando's sales expenses accounted for 55% of its revenue in the first half of 2025, while R&D investment stood at merely 1.7%. The cosmetics sector's characteristics – low entry barriers, intense competition, and weak consumer loyalty – compel enterprises to continuously invest in marketing to sustain market visibility.

According to disclosures, Proya's Hong Kong IPO proceeds will primarily fund: enhanced R&D capabilities, including AI digitalisation in cosmetics development; brand building and sales channel expansion; smart manufacturing and operational digital upgrades; and potential investment, acquisitions, and strategic partnerships.

This strategic positioning indicates Proya is seeking to overcome current growth bottlenecks by enhancing R&D capabilities and accelerating internationalisation to unlock new development opportunities.

From an investment perspective, Proya's core value lies in capitalising on the industry tailwinds of the ‘domestic brands resurgence’ while establishing competitive advantages through its exceptional operational capabilities. Despite challenges such as sluggish growth in its flagship brand, an underdeveloped multi-brand matrix, and high sales expense ratios, the company retains medium-to-long-term allocation value within China's cosmetics sector – a market characterised by sustained growth potential.

With the completion of management succession (Hou Yamen assuming the role of General Manager in September 2024) and progress towards a Hong Kong listing, whether Proya can successfully overcome growth bottlenecks and transition from a domestic leader to an international brand warrants continued market attention.

Disclaimer: The content herein is for reference only and does not constitute any form of investment advice. Should any information contained herein prove inaccurate, incomplete, or potentially misleading, please refer to the company's official announcements. Market risks exist; investment requires caution.