Key points of investment:
The company released the 23Q3 quarterly report, and the net profit of the mother increased by 585.8%. 1) 23Q1-3 revenue was 3.69 billion yuan, up 22.1% year on year (according to the company's 23Q3 earnings report, same below); net profit was 190 million yuan, a sharp increase of 585.8% year on year; net profit after deduction of 170 million yuan, a sharp increase of 459.8% year on year. 2) 23Q3 revenue was 1.38 billion yuan, up 23.0% year on year; net profit was 0.6 billion yuan, a sharp increase of 332.4% year on year; net profit after deducting non-return mother was 500 million yuan, up 594.4% year on year. Consumer consumption was upgraded in 23Q3, and the performance of the three major sectors of fashion, women's clothing, medical beauty, and green babies increased across multiple industries. At the same time, they received investment income of about 52.39 million yuan, and the profit side improved dramatically.
23Q3 profitability continued to grow, and cost control reduced costs and increased efficiency. 1) The gross margin of 23Q1-3 increased 0.2 pct year on year to 57.6% year on year, and the net profit margin increased 4.8 pct year on year to 5.7%. Cost control was effective. Sales/management/R&D expenses were -1.7/-0.9/-1.3 pct year-on-year to 40.9%/8.0%/1.8%, respectively. 2) In the single quarter of 23Q3, the company's gross margin fell 1.8 pct year on year to 55.1% year on year, and net profit margin increased 3.7 pct to 4.9% year on year.
The medical and aesthetic sector is driving performance improvements and consolidating the position of domestic medical and aesthetic terminals. According to the company's semi-annual report, the three major medical and aesthetic systems, Milan Kashiwa Medical Beauty, and Gaoyi each have 4/24/2 institutions, for a total of 30. 1) 23H1 medical and aesthetic revenue was 9.1 billion yuan, up 25.2% year on year, accounting for 39.2%, and gross margin increased 5.3 pct to 54.1% year on year. 2) Old institutions are the main profit force, and newly established institutions are the main growth force. As of the first half of '23, there were a total of 33 institutions. Among them, the revenue of old institutions (over 3 years) /new institutions (1 to 3 years) /newly established institutions (within 1 year) was 5.8/29/0.3 billion yuan, respectively, and the growth rate was 37.6%/2.9%/89.6%, respectively, accounting for 64.1%/32.4%/3.5% of medical and aesthetic business revenue. The net interest rate of the old institution was 10%, the net interest rate of the second new institution was 2.8%, and the net interest rate of the new institution was negative (-96.1%).
Young institutions are popular, and the “light medicine and beauty” business has grown significantly. Looking at H1 in '23, 1) The younger brand Milan Kashiwa expanded the fastest, contributing over 50% of revenue. Milan Baiyu, a high-end department, had revenue of 57.1%; revenue from the medical and aesthetic sector was 57.1%; crystal skin medical and aesthetic revenue, which focuses on “medical rejuvenation,” was 190 million yuan, an increase of 23.2%; the professional high-end department had a lifetime revenue of 0.9 billion yuan, a year-on-year decrease of 28.1%; the newly acquired Kunming Han Chen revenue was 110 million yuan, up 18.9% year on year; 2) “Light Medicine and Beauty” non-surgical project revenue was 740 million yuan, up 32.8% year on year, up 4.8pct to 82.0%; surgical program revenue was 160 million yuan, a year-on-year increase of $160 million The year-on-year decline was 0.9%, and the share fell to 18.0%; 3) The size of the company's seven M&A funds reached 2.84 billion yuan, and continued specialized acquisitions and incubated medical standards to increase the scale.
23 The clothing business grew in double digits in the first half of the year, with multiple business segments rotating and collaborating. 1) The brand image of fashion women's clothing has been fully upgraded, and e-commerce channels are developing rapidly. 23H1's fashion women's clothing business revenue was 9.1 billion yuan, up 21.7% year on year, accounting for 39.3% of revenue, gross margin slightly decreased by 0.4pct to 62.4%. Revenue from online and proprietary channels was 34/ 5.5 billion yuan respectively, accounting for 37.3%/60.1% of women's clothing revenue. Offline recovery and e-commerce are driving two wheels. 2) The green baby business benefits from new retail construction. 23H1's revenue was 4.7 billion yuan, up 15.8% year on year, gross margin increased 0.9 pct to 61.7%. Self-operated and distribution channel revenue was 36/0.8 billion yuan respectively, accounting for 76.2%/17.3% of green baby revenue. Multi-channel promotion established a brand image. The high-end brand “ETTOI” was promoted as the main force in the baby sector, vigorously developing “new retail” models such as WeChat Mall and live streaming.
The company is driven by the troika of fashion women's clothing, green babies, and medical beauty. In the future, it will continue to deploy through self-build+mergers and acquisitions to maintain its “increased holding” rating. Currently, the competitive landscape of medical and aesthetic institutions is scattered, and it is expected that they will concentrate on the leaders in the future. The company promotes the 1+N strategic layout through chain and branding through endogenesis and extension. Considering that post-epidemic consumption recovery is slightly lower than expected, industry competition has intensified, sales expense ratio forecasts have been raised, and profit forecasts have been lowered, the company is expected to achieve net profit of 2.6/3.2/400 million yuan (original profit forecast was 3.6/42/4.7 billion yuan) in 23-25 respectively. The corresponding PE is 35/29/23 times, and the corresponding PS is about 2X. The valuation of the company's women's and children's clothing business refers to the clothing industry's Golis, Land, and Peace Bird, and the valuation of the medical and aesthetic business refers to Aier Ophthalmology, General Health, and American Health. Overall, the company's valuation level is lower than the average of comparable companies, maintaining an “increase in holdings” rating.
Risk warning: stricter medical and aesthetic compliance, brand damage due to medical accidents, clothing business inventory risk, and declining residents' income expectations.