Incident review
The company announced the three-quarter report for 2023. The first three quarters of 2023 achieved revenue of 4.22 billion yuan, a decrease of 2.3%, net profit of 5.1 billion yuan, a decrease of 24.1%, a decrease of 43.1 billion yuan, a decrease of 28.0%, and EPS of 1.07 yuan; of these, 23Q3 achieved revenue of 1.15 billion yuan, a decrease of 17.3%, realized net profit of 0.9 billion yuan, a decrease of 56.0%, and net profit of 0.7 billion yuan, a decrease of 61.5%, and EPS of 0.19 yuan.
Incident reviews
Internal adjustments are dragging down the prosperity of the cosmetics business, and revenue growth is under pressure. The company's 23Q3 revenue decline was mainly due to the fact that the cosmetics business was in a period of personnel, channel, and product adjustments, compounded by the slowdown in the cosmetics industry, which led to a decline in the cosmetics business; the raw materials business continued to seize share and maintain a good momentum with a rich variety of products; the medical terminal business continued to maintain a high level of prosperity through early product and channel adjustments, and the volume of three types of device products was stable.
The decline in gross margin dragged down the net interest rate. The company's gross margin fell 4.2 pct to 73.1% in the first three quarters of 2023, of which 23Q3 gross margin fell 5.7 pct to 71.1%. The company's gross margin continued to decline mainly due to: 1) the decline in gross margin during the cosmetics business adjustment process; 2) the gross margin of food and cosmetic grade hyaluronic acid raw materials was still under pressure due to factors such as industry price wars. The sales expense rate/ management expense rate/ R&D expense ratio for the first three quarters of 2023 was 46.0%/7.6%/6.6%, with year-on-year changes of -1.0pct/+1.3pct/+0.2pct respectively, of which the 23Q3 sales expense rate/management expense rate/R&D expense ratio was 45.6%/10.0%/7.9%, respectively. The year-on-year rate of change was -0.8pct/+2.9pct/+0.8pct, respectively. The sales expense ratio was well controlled, and the management cost rate increased due to revenue scale; Overall, before 2023 In the third quarter, the company's net profit margin fell 3.5pct to 12.2%, and 23Q3 fell 6.9pct to 7.8%.
Profit forecast and investment advice: We have lowered our profit forecast. It is estimated that the company's net profit from 23 to 25 will be 790 million yuan/970 million yuan/1.24 billion yuan, respectively, and the corresponding PE will be 46 times /37 times/29 times, maintaining the “buy” rating.
Risk warning:
The prosperity of the industry fell short of expectations; the adjustment of the cosmetics business fell short of expectations; and the competitive pattern of raw materials worsened.