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.

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.

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.

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.