1-3Q23 performance is lower than we expected.
The company announced 1-3Q23 results: revenue 4.221 billion yuan, year-on-year-2.3%; return to the mother net profit 514 million yuan, year-on-year-24.1%; deduction of non-net profit 433 million yuan, year-on-year-28.0%. From a quarterly point of view, 1Q/2Q/3Q23 revenue is + 4.0%, respectively, 5.3%, 17.3%, + 0.4%, 18.0%, 56.0%, and-17.4%, 8.9%, 61.5%, respectively, compared with the same period last year. The performance is lower than we expected, mainly due to the pressure on the skin care business, but the medical terminal and raw materials business performed better. We believe that the company is in the internal organization, channels, product adjustment and change period, the follow-up is expected to move towards high-quality development, medium-and long-term still optimistic about the company's prospects as a biotechnology leader.
Trend of development
1. Q3 skin care business is obviously under pressure, the medical terminal business performance is outstanding, and the raw materials are growing steadily. From a business point of view, we expect ① skin care products: Q3 income to decline significantly, mainly due to internal channel adjustment, organizational change superimposed by the impact of weak demand in the industry, including run Baiyan, Quadi, Miebel, muscle activity income are all double-digit decline compared with the same period last year. ② medical terminal: Q3 revenue increased by more than 35% compared with the same period last year, of which medical and beauty products increased by more than 30% year-on-year, mainly driven by the high increase of injection products represented by Runzhi filling and micro-crosslinking. The income of 1-3Q23 accounted for more than 90%, which was higher than that in 22 years. The product structure was further optimized, and the proportion of direct sales increased significantly. In addition, orthopaedic and ophthalmology business also achieved rapid growth. ③ raw materials: Q3 income double-digit growth, of which food-grade raw materials faster growth.
2. The income scale shrinks and the terminal price competition intensifies, and the profitability decreases. The gross profit margin of 3Q23 was-5.7ppt to 71.1% compared with the same period last year, which was mainly affected by the decline in the gross profit margin of cosmetics and raw materials business, in which cosmetics was mainly affected by the intensification of price competition. In the raw material business, the gross profit margin of pharmaceutical grade raw materials increased slightly, while that of food grade and cosmetic grade decreased. In addition, the gross profit margin of medical terminals is basically the same as the same period last year, in which the gross profit margin of medical and beauty injection products increased year-on-year, mainly benefiting from the increase in the proportion of the high gross margin series. On the expense side, Q3 sales, management and R & D rates are year-on-year-0.8ppt/+2.9ppt/+0.8ppt to 45.6% Universe 10.0% Universe 7.9%. Under the combined influence, Q3 net interest rate is from-6.9ppt to 7.8%, and non-net interest rate is deducted from-7.3ppt to 6.3% year-on-year.
3. Look forward to the follow-up effect of the internal change, and the short-term pressure will not change the company's medium-and long-term growth prospects. Looking forward to the follow-up, we believe that: ① skin care products: the follow-up new products of the four major brands will lead to the optimization of product structure and healthy channel structure, which is expected to gradually stabilize and return to growth; ② Medical Beauty: the 8th approved product of the company in October, injection hyaluronic acid filler has been put on the market, expanding lip indications. Two types of III medical device aquatic light products have entered the registration application stage and clinical follow-up stage respectively, and are expected to become the first batch of water light indication products listed in compliance; ③ raw materials: continuous breakthroughs in various categories, the August recombination of type III humanized collagen raw material products is expected to contribute to the increase. We are still optimistic about the company's growth prospects as a biotechnology leader.
Profit forecast and valuation
Taking into account the intensification of the external competitive environment and the company's proactive strategic adjustment, the 24-year profit forecast for 2023max is reduced by 18.5% to 1.11 billion yuan, and the current share price corresponds to the 24th 42max 33x Pmax E. Maintain the outperform industry rating, combined with the adjustment of earnings forecasts and the company's medium-and long-term growth prospects, cut the target price by 10% to 117 yuan, corresponding to 2024 51xP/E, 53% upside compared with the current stock price.
Risk
Industry competition continues to intensify; product quality problems; new product incubation progress is not as expected.