Event: the company disclosed 23H1 results: the company's 2023H1 realized revenue of $172 million / yoy-1.7%, realized net profit of $19 million / yoy-8.4%, realized adjusted net profit of $21 million / yoy-17.1%. The gross profit margin / net profit margin is 61.4% and 10.9% respectively, which is + 4.3/-0.8pct respectively compared with the same period last year.

Overseas macro-economy and corporate business transformation have a temporary impact on revenue growth. In terms of business, the company's medical, cosmetic / dental / injection filling / service and other businesses achieved income of US $1.47 million, respectively, with an income of US $0.05 million. Compared with the same period last year, they were-4.2%, 27.2%, 29.6%, 45.9%, respectively. From a sub-regional point of view, the income of North America / Asia-Pacific / Europe / Middle East and Africa / Latin America is 0.80, 0.22 and 0.140 million respectively, compared with the same period last year. + 13.7%, 28.4%, 28.4%, 21.7%, 5.5%, respectively. The slowdown in business income growth in some regions is mainly due to: (1) the negative impact of the macroeconomic environment and the conflict between Russia and Ukraine on the performance of the European market. (2) the transition from distribution to direct marketing in some regions has a temporary negative impact on revenue growth, such as the establishment of new direct sales offices in the UK (Europe) and Dubai (Middle East and Africa). China is in the period of business transition and new business construction of the acquisition of Fayton, resulting in a temporary slowdown in business growth in the above countries.

Although the transformation of direct business affects short-term performance, it is good for long-term development. Take the merger and acquisition of Fayton as an example, previously, it was difficult to directly reach the terminal demand due to the distribution system. We believe that after the company's business is transferred to direct operation, we can obtain first-hand market feedback and provide product development direction reference for the R & D department, and can improve market penetration efficiency and enhance brand awareness through the operation of 2B+2C. If the future direct business in China gradually matures, it is also possible to launch products in the domestic market.

The increase in the proportion of direct sales drives the gross profit margin to continue to be optimized, and the investment in direct marketing-brand marketing lays the foundation for long-term development. The income of 23H1 direct selling business reached US $119 million (excluding dentistry) / yoy+12.1%, direct selling accounted for 72.1%. The increase in the proportion of high gross margin direct selling business / product portfolio sales pushed the company's gross profit margin up to 61.4%. However, the increase in short-term direct selling business expenses, the opening of new direct sales offices, the continuous investment and incubation of business lines, and the additional expenditure of the new brand ambassador project to enhance brand awareness have put some pressure on profitability. 23H1 net interest rate is 10.9%/yoy-0.8pct, adjusted net interest rate 12.0%/yoy-2.3pct We believe that in the long run, direct distribution and brand power marketing are conducive to better access to the terminal consumer market, laying the foundation for the company's long-term development.

Looking forward to the whole year, the focus of development is North America and China. For the whole of 2023, the company's strategy focuses on cultivating the North American and Chinese markets, while exploring growth opportunities in other countries and regions in Europe and Asia-Pacific. The core strategy of the Chinese market is: (1) integrate and optimize direct channels and improve market penetration; (2) promote the approval and listing of injection products and the operation of household equipment brands. The North American market promotes growth through a new range of products (sexual health, hair growth and other new solutions) and empowers after-sales teams to drive growth.

Investment advice: the company's performance is temporarily affected by overseas macro-economy and the transition of the company's business transformation on revenue and performance growth in the short term. however, in the long run, the development of direct business will help the company to reach the end market more effectively and make rapid feedback in response to local market needs, which is conducive to the long-term development of the company's multi-business in multiple regions.

Risk factors: the recovery of consumption power is not as expected, the competition in the medical and beauty industry is intensified, and the effect of product promotion is not as expected.