This year, HAOHAI BIOTEC (06826) has faced a significant decline in both its A-share and H-share prices, pressured by the evident crisis of continuous earnings deterioration and the hidden risk of alleged insider trading by its controlling shareholder.

The company's Hong Kong stock price hit a new low for the year on June 29, touching HK$15.04 intraday.

Zooming out, the stock has experienced two distinct downtrends since the start of the year: one from February to April, and another more recently from May to June.

Behind these declines lies a broader market repricing of the medical aesthetics sector at this juncture.

In recent years, China's medical aesthetics industry has transitioned from its initial high-speed growth phase to a stage of high-quality, steady expansion, with the industry's compound annual growth rate slowing from over 15% (2017-2024 CAGR) to a mid-to-high single-digit figure (forecasted at around 7% for 2024-2028).

This slowdown is primarily due to the industry moving past its extensive growth model, formally entering a phase of intense adjustment characterized by competition for existing market share and structural transformation.

However, following its two rounds of declines, HAOHAI BIOTEC's price-to-earnings valuation has fallen below the industry average.

Coupled with a recent trend of significant net buying by large orders, signs of a potential stabilization and rebound are becoming increasingly apparent on the trading floor.

An Extended Period of Downturn

The stock's downward trajectory, spanning from its peak on February 11 to its new low on June 29, has effectively covered the first half of the year.

Chart-wise, the price action during this period delineates the first decline from February to April and the second from May to June.

Examining the February-April period first, the stock fell by 20.19%, driven by the dual pressures of disappointing financial results and industry policy impacts.

This timeframe coincided with the dense reporting season for 2025 annual reports and 2026 first-quarter results, where a collective "braking" of earnings became a common theme across the medical aesthetics sector.

With the concentrated release of 2025 financial reports, numerous listed companies in the domestic medical aesthetics industry, from raw material giants to functional skincare brands, reported declines in both revenue and net profit, or profit growth without corresponding revenue increases.

Entering the first quarter of 2026, the trend of weakening growth momentum in the sector did not reverse, remaining in an adjustment phase, with some leading companies even reporting year-on-year declines in both revenue and net profit exceeding 20%.

In 2025, HAOHAI BIOTEC also experienced a decline in both revenue and net profit.

Its financial report shows that for 2025, the company achieved revenue of RMB 2.473 billion, a year-on-year decrease of 8.33%, and a net profit attributable to shareholders of RMB 251 million, a sharp decline of 40.3%.

Breaking down by business segment, among its four core divisions in 2025, only the hemostasis segment achieved significant revenue growth, while the other three segments saw revenue declines to varying degrees.

Furthermore, the company stated in its report that due to the combined impact of multiple external factors, the operating performance of its intraocular lens business fell short of expectations, leading to an impairment provision of approximately RMB 141 million for the goodwill of its subsidiary engaged in importing the Lenstec brand of intraocular lenses from the United States.

At the industry level, as the second phase of the national centralized procurement for intraocular lenses progressed, domestic products accelerated their substitution for imported brands based on price advantages.

Reforms in the DRG/DIP payment systems further compressed demand for standard spherical lenses, while the company's development of high-end products had not yet generated substantial revenue.

Changes in the policy environment pressured the gross margin of the ophthalmology business, and the reshaping competitive landscape presented ongoing challenges for the company.

Consequently, starting from mid-February, the market accelerated its relatively pessimistic pricing of the compressed growth space for the medical aesthetics sector, reflected in HAOHAI BIOTEC's stock price briefly touching the upper Bollinger Band before rapidly declining, accompanied by a downward expansion of the bands, and oscillating lower until April 24.

At that point, the on-market RSI indicator had fallen below 30, indicating an increasingly clear oversold condition.

Therefore, following the official release of the 2025 annual report and bolstered by the company's share buybacks, HAOHAI BIOTEC's stock price staged a minor rebound rally from April 27 to May 11.

However, before the Bollinger Bands could expand upward to signal a sustained rebound, the stock price declined again due to negative sentiment stemming from issues related to its controlling shareholder.

In reality, the market's concerns about corporate governance stability triggered by this event were merely a catalyst.

After the negative news broke on April 30, the stock price corrected for only two trading days before resuming its upward move to the upper Bollinger Band, only starting to retreat when the RSI indicator exceeded 70, signaling an overbought condition.

The magnitude of the stock's decline during the second downtrend from May to June was noticeably greater than the first.

The reasons lie not only in the negative impact of the controlling shareholder issue but also in the risk brought by tightening liquidity in the Hong Kong market.

During this period, reduced market liquidity and a decline in risk appetite in the Hong Kong stock market exacerbated the downward pressure on the stock price.

Despite the company's continued share repurchases (cumulatively over HK$23 million this year) and maintaining a 6% dividend yield, the clear shift in market risk sentiment at the time was unfavorable for stock price stability.

Signs of a Potential Turnaround?

After a stretch of ten consecutive down days and persistent gradual declines, HAOHAI BIOTEC's stock price touched a bottom of HK$15.04 intraday on June 29.

At this point, the company's P/E valuation had fallen below 15 times, significantly lower than the industry average.

Volume data also indicates that after a single-day sell-off exceeding 500,000 shares on June 12, the selling pressure on the trading floor gradually showed signs of exhaustion.

On July 15, a net inflow of HK$1.9318 million from large orders was recorded on the trading floor, with net inflows occurring on four out of the subsequent five trading days, offering the market a glimpse of potential stabilization and rebound.

In fact, the sharp rise in HAOHAI BIOTEC on July 15 is closely related to the recent rebound in the medical aesthetics sector across both the A-share and H-share markets.

On July 15 within the A/H medical aesthetics sector, Jinbo Biotech surged over 15%, with net inflows from major funds reaching RMB 992 million.

On July 16, the sector continued its upward trend, with Jinbo Biotech rising another 8%+, resulting in a cumulative gain of over 20% in two days, and Giant Biogene's Hong Kong shares rising over 4%.

This sectoral rally is essentially an overflow of sentiment from the broader A/H pharmaceutical sectors.

Recently, pharmaceutical services and pharmaceutical commerce segments in both markets have experienced multiple waves of limit-up rallies and significant gains.

As a consumer healthcare segment highly correlated with pharmaceuticals, medical aesthetics has become an extended focus for capital flows.

For HAOHAI BIOTEC, Southbound Stock Connect capital has once again emerged as a primary buying force during this rebound.

Over the past five trading days, the top five selling broker seats for HAOHAI BIOTEC were Morgan Stanley, UBS, Southbound (Shenzhen), BNP Paribas, and Shenwan Hongyuan, with net sales of 194,200, 188,200, 102,900, 28,200, and 14,000 shares respectively.

On the buying side, Southbound (Shanghai) was the largest buyer, with a net purchase of 184,700 shares; Goldman Sachs, Merrill Lynch, Citibank, and HSBC recorded net purchases of 106,800, 80,600, 58,500, and 49,500 shares respectively.

Notably, Southbound (Shanghai), as the largest brokerage holder of HAOHAI BIOTEC, now holds a 30.93% stake.

It is evident that recent on-market trading activity for HAOHAI BIOTEC has become more active compared to before, indicating that some short-term trading capital has chosen to take profits.

However, a significant amount of capital has also chosen to buy at perceived lows, likely based on the logic of fundamental improvements within the sector, such as product launches and platform upgrades by leading medical aesthetics companies.

Nevertheless, whether the sector can sustain its strength going forward may ultimately depend on the overall industry's ability to deliver on its earnings potential.