Overview of events

On October 30th, the company released its third quarterly report for 2023. 23Q1-Q3 's revenue was 4.221 billion yuan, down 2.29%. The net profit returned to its mother was 514 million yuan, down 24.07%. The net profit after deducting non-return was 433 million yuan, down 27.97%. Of this total, 23Q3's revenue was 1.146 billion yuan, down 17.26%; the net profit returned to the mother was 90 million yuan, down 56.03%; and the net profit after deducting non-return was 72 million yuan, down 61.53%.

Analysis and judgment

Cosmetics business adjustment deepened, short-term performance under pressure. 23Q3 performance showed a temporary decline, waiting for repair to pick up. On the profit side, the gross profit margin / net profit rate of 23Q1-Q3 is 73.07% / 12.01%, respectively, compared with the same period last year; the gross profit margin / net profit rate of Q3 company is 71.13% / 7.46%, respectively, compared with the same period last year.-5.67/-7.00pcts, the profit side is significantly under pressure. On the expense side, the 23Q1-Q3 sales / management / R & D expense rates are 46.02%, 7.57% and 6.56%, respectively, compared with the same period last year.-0.96/+1.26/+0.15pcts, the company has strengthened its cost control, and the rate of sales expenses has decreased compared with the same period last year.

From a business point of view, 23H1 raw materials and medical terminal business revenue growth is steady, skin care and food business growth is under pressure.

1) the revenue of the raw material business was 567 million yuan, an increase of 23.20%, accounting for 18.45%, and the gross profit margin was 65.65% (- 6.74pcts). In terms of product types, medical grade accounted for 38.90%, cosmetic grade accounted for 32.74%, and food grade accounted for 10.37%. Benefiting from the company's highly efficient internationalization strategy, the growth rate of pharmaceutical-grade raw materials is obvious; the income of cosmetic-grade raw materials has achieved steady growth and continues to transition from providing products to providing services; and the income of food-grade raw materials is basically flat. Gross profit margin has declined due to short-term market competition. From a regional point of view, the export income of 23H1 raw materials reached 275 million yuan, accounting for 48.49% of the company's raw material business income, and the sales of pharmaceutical-grade raw materials continued to grow in Europe, Asia, America and other places, of which the European market grew the fastest.

2) the revenue of the medical terminal business reached 489 million yuan, an increase of 63.11%, accounting for 15.90%, and the gross profit margin was 82.30% (+ 0.37pcts). Of this total, the income of skin medical products reached 326 million yuan, an increase of 56.76%. In terms of medical and beauty products, Runzhi doll needle continues to promote compliance with long-term and versatile ideas to create explosive products in the industry; Runzhi single-phase Natural, Runzhi two-phase 2, 3, 5 to create family-style layered anti-aging, to provide consumers with an one-stop facial rejuvenation solution.

3) the revenue of the functional skin care business reached 1.966 billion yuan, down 7.56%, accounting for 63.92%, and the gross profit margin was 74.49% (- 4.25pcts). In terms of brand, the income of run Baiyan / Quadi / Mibel / BM muscle activity is RMB 6.32, 5.43 and 2.17 million respectively, with a drop of 2.04%, 10.10%, 16.81% and 29.62% respectively. The four major brands are beginning to take shape, 23H1 comprehensively combs the four major brands, the company takes the initiative to slow down the development speed, and optimizes the product strategy, channel layout, brand construction and other aspects to promote the long-term sustainable development of the brand.

4) the revenue of functional food business reached 33 million yuan, with a drop of 25.81%. The company returns to the large single product strategy, product brands have their own focus and focus, channels to strengthen offline layout efforts to enhance consumer awareness.

Investment suggestion

Huaxi Biology, as a world-renowned biotechnology company and bioactive materials company, is a hyaluronic acid whole industry chain platform enterprise integrating R & D, production and sales. The technology of microbial fermentation to produce hyaluronic acid is in the lead in the world. Relying on the "four-wheel drive" development strategy, to build an integrated business structure of the industrial chain, including bioactive substances, medical and beauty terminals, functional skin care products and functional food. With hyaluronic acid as the basic plate, the medical and beauty business product pipeline is clear, and the R & D plus layout of synthetic biology, collagen, cell culture medium and other races is rich in the research and development of medical products, which is expected to open the new growth ceiling. It is estimated that the revenue for 23-25 is 60.33 billion yuan, respectively, which is-5.1%, 20.5% and 23.5%, respectively, compared with the same period last year. The net profit returned to the home is 8.05, 978, 1.45 billion yuan, respectively, and-17.0%, 21.4%, 27.3%, respectively.

The corresponding EPS is 1.67 Universe 2.03 EPS 2.58 yuan, and the previous share price PE is 46-38-30 times, maintaining the "buy" rating.

Risk hint

Competition aggravates the risk, the promotion of new cosmetics products is not as expected, the risk of replacement of new products, the risk of the loss of core technical personnel, the risk of stricter supervision of the industry.