CGS-CIMB: "Beauty sells! Millennials increase spending on cosmetics"

Excerpts from CGS-CIMB report

An outlet of Best World International in Zhongshan, China. Photo: Internet Beauty sells! Amid recent store closures and the bankruptcies of retail chains worldwide, the cosmetics sector seemingly bucks the trend. In fact, the topic of beauty is second only to gaming in terms of number of views on YouTube. According to Orbis Research, the global cosmetic products market is projected to attain a market value of US$805.6bn by 2023F, registering 7.14% CAGR over 2018-23F.

Apart from increasing spending on cosmetics by millennials, we think that ageing demographics and the growing number of image-conscious men will also contribute to the cosmetics market growth.

The NPD Group (formerly known as the National Purchase Diary Panel Inc. and NPD Research Inc) estimated that millennials spent 25% more on cosmetics in 2016 than two years before.

In an Apr 2018 survey jointly carried out by iResearch and Chinese online discount retailer Vipshop Holdings Ltd (VIPS US, Not Rated), 18.8% of men born after 1995 use blemish balm (BB) cream, 18.6% use lipstick, 8.8% use eyebrow pencils and 8.5% use eyeliner.

We expect consumers discovering more young and independent cosmetic brands, as well as e-commerce gaining prominence as a distribution channel to sustain the sales growth momentum of the cosmetics industry.

Attractive acquisitions of smaller companies by major cosmetic players will also be a driver of sector growth, in our view.

Within our ASEAN stock coverage universe, we think Beauty Community (BEAUTY TB, Add, TP: THB12.10) and Best World (BEST SP, Hold, TP: S$1.90) are poised to capitalise on such secular trends, as they have successfully introduced new products and built strong presence in a few countries.

Full report here.