Event: In 2023Q3, the company achieved operating income of 1,146 billion yuan, -17.26% year-on-year, net profit of 90 million yuan, net profit of 56.03% year-on-year, net profit of 56.03% after deduction of net profit of 72 million yuan, -61.53% year-on-year.
The raw materials+medical and aesthetic business continues to perform well, and the skincare business is in a period of strategic adjustment. By business, pharmaceutical-grade raw materials in the raw materials business benefit from the continuous and efficient advancement of international strategies, continuous breakthroughs in multiple categories, and steady growth in cosmetics and food-grade raw materials; the medical and aesthetic business has benefited from business changes over the past 1 to 2 years, continuing the high growth trend; the functional skincare business has experienced a significant decline in 23Q3 revenue, mainly affected by consumption downgrades and slowing traffic dividends. The company has taken the initiative to make strategic adjustments and organizational structure changes, aiming to pursue long-term steady development.
Gross margin declined due to the impact of the skincare business, and profitability declined. 23Q3's gross profit margin was 71.13%, year-on-year -5.67pcts, mainly due to a decrease in the unit sales price of the skincare business; the company's sales/management/R&D rates were 45.58%/9.97%/7.89%, respectively -0.82/+2.90/+0.83 pcts, and sales rates were optimized; the increase in management fees was mainly due to increased labor costs; overall, 23Q3's net profit margin was -6.99pcts to 7.46%, and profitability declined.
Increased R & D+new production capacity layout, continuous optimization of products+channels. Recently, the company's first GMP cell culture medium production line was officially put into operation, marking the first time that a series of products in the regenerative medicine sector have been localized; hyaluronic acid fillers suitable for lip injections have been officially approved, improving the medical and aesthetic injection product matrix, further consolidating the company's leading position in hyaluronic acid; collagen research and development pipelines are rich, and restructured human collagen raw products were successfully launched in August, and the raw material market is expected to continue to expand; the functional skincare business, moisturized, and other core series, such as Baiyan Moisturizer, have begun to expand; the scale of core products such as Quoddy has been upgraded to the blue. Iteratively update and actively optimize the product structure; The channel side will strengthen internal control and standardize the price system, and expect the company to achieve healthy and steady growth in the future.
Investment advice: The company's EPS for 2023-2025 is expected to be 1.73/2.15/2.57 yuan, corresponding to the latest PE by 43.7/35.1/29.4 times, respectively, to maintain the “buy” rating.
Risk warning: industry competition intensifies; new product promotion falls short of expectations; terminal demand recovery falls short of expectations.