Event: the company released the 2023 mid-term report, 2023H1 achieved revenue of 1.606 billion yuan, year-on-year + 63.0%; return to the mother net profit of 667 million yuan, year-on-year + 52.5%; adjusted net profit of 676 million yuan, year-on-year + 46.1%, the company's first-half performance exceeded expectations.

Both online and offline channels can increase income through the release of collagen sticks and other products. 1) according to the product category, the income of 23H1 company's efficacy skin care products / medical dressings / health food products was 11.97 / 3.98 billion yuan respectively, which was + 95.1% / + 14.6% /-54.8% compared with the same period last year. The volume of Kefumei collagen products nearly doubled the growth of efficacy skin care products. 2) from the perspective of different channels, the direct sales / distribution income of 23H1 Company is 10.83 / 523 million yuan respectively, which is + 112.2% / + 10.2% compared with the same period last year. In the direct selling channel, the revenue of DTC stores / e-commerce / offline is RMB 9.77 / 0.69 / 37 million respectively, an increase of 128.4% / 18.6% / 50.8% compared with the same period last year. The growth of online direct sales is driven by the expansion of offline stores and product types. 3) from the perspective of brands, the income of Kefumei / Corijin / other brands is 12.283.21 / 46 million yuan respectively, which is + 101.0% / + 6.4% /-5.1% compared with the same period last year. The volume of Kefumei single products has increased, and the product line of small brands has led to a decline in revenue.

The online direct selling channel expands rapidly, and the sales expense rate increases. 23H1 gross profit margin is 84.1%, down 1.0pct from the same period last year, mainly due to the expansion of product types and channels. 23H1 sales / management / R & D rates are 34.58% / 2.96% / 2.12%, respectively, compared with the same period last year. The increase in sales rates is due to the rapid expansion of online direct sales channels, and the decrease in management costs is due to the reduction in listing expenses.

Research and development of enabling products, accelerate the expansion of channels. 23H1 has added 6 new patents, totaling 86, and the company expects to add 2 recombinant collagen production lines, 2 cosmetics production lines and 1 medical device production line, in order to improve production capacity and efficiency and empower products. Kefumei Recombinant Collagen Series continued to sell more than 35 million collagen rods in the whole network during the period of 618, with GMV + 700% compared with the same period last year, and continued to launch collagen milk and collagen comfort patch; during the period of 618, Ke Lijin sold 1.7 million pieces of booming repair patch in all channels. In addition, the company is rich in nearly 130 items of research pipelines, new products and sufficient iterative upgrade potential. The sales network has expanded, 1400 public hospitals, 2200 private hospitals and clinics, 2200 chain pharmacies, 4000 CS/KA stores, online DTC stores and e-commerce have developed rapidly, and the channel operation capacity has been continuously improved.

Investment suggestion: we estimate that the EPS for 23-25 years will be 1.30 euro and 2.27 yuan respectively, and the current price corresponding to PE will be times that of 25-19-15. As a leading enterprise of recombinant collagen, the company has sufficient growth momentum and upgraded the company to "buy" rating.

Risk tips: regulatory policies exceed expectations; market demand is lower than expected; industry competition intensifies; new product promotion is not as expected; product progress is not as expected; product safety risks.