Company announcement: 23H1 revenue of 924 million yuan/ -34.75%, net return profit - 62 million yuan/ +61.16%, net non-return profit minus 64 million yuan/ +60.25%. Among them, 23Q2's quarterly revenue was 527 million yuan/ -27.70%, net return profit was 114 million yuan/ +85.98%, net profit after deducting non-return net profit of 115 million yuan/ +85.57%.
Revenue from the cosmetics OEM business has rebounded, and profits have significantly reversed losses. On a quarterly basis, in 23Q1, Northbell's revenue growth rate was -9.65%/+0.87% respectively, net profit was -0.44/-0.1 billion yuan respectively, and the gross margin of Qingsong Co., Ltd. was 2.51%/11.48% respectively (since the chemical business was divested, this figure is approximately equal to the gross profit margin of the cosmetics business), and the operating conditions all increased markedly month-on-month. The 23Q2 revenue recovery stemmed from an increase in overall demand in the cosmetics industry. Among them, the increase in demand for big brands was significantly better than that for small brands; the sharp decline in profit loss in 23Q2 mainly stemmed from: 1) the cost reduction and efficiency measures such as cosmetic raw materials and freight fell back to normal levels; 2) cost reduction and efficiency measures such as layoffs promoted by the company during the pandemic gradually showed results.
We believe that as domestic demand for cosmetics continues to pick up, 23Q3 companies are expected to reverse losses, and 23Q4 profit margins will further increase.
Face masks & skincare continue to recover, and wipes gradually return to normal. By business, 23H1 mask has revenue of 400 million yuan/ -3.43%, gross profit margin of 5.13% /+2.84pct; skincare revenue of 286 million yuan/ -2.39%, gross profit margin of 6.53% /+5.20pct; wipes revenue of 147 million yuan/ -26.91%, gross profit margin of 10.84% /+8.23pct. Overall, we believe that the wet wipe business is gradually recovering (revenue of 2.5-300 million yuan in the first half of a normal year). If 23Q2 excludes the impact of the wet wipe business, it is expected that revenue from both the mask and skincare businesses will have increased significantly.
The company had previously divested its chemical business, and its development focus was on Northbell's main cosmetics OEM business. We think the company may have gone through the most difficult moment. Considering that the company has continued to expand production in the past three years, as downstream demand continues to pick up, the company's profit margin may recover faster.
Profit forecast: According to Wind's unanimous expectations, the company's net profit for 2023-2024 was 0.93/199 million yuan, respectively, and the corresponding PE at the closing price on August 29 was 29/17/14 times, respectively.
Risk factors: Upstream costs of cosmetics have risen sharply; domestic consumption continues to weaken, etc.