Incidents:
The company released its three-quarter report for 2023.
Comment:
Q3 Revenue and profit declined year over year, and profitability was under pressure
In 2023, Q1-Q3 achieved operating income of 4.221 billion yuan, a year-on-year decrease of 2.29%, net profit attributable to the parent company of 514 million yuan, a year-on-year decrease of 24.07%, and a net profit of 433 million yuan deducted from the parent company, a year-on-year decrease of 27.97%. Overall performance was under pressure. On the cost side, the sales/management/R&D expense ratio of 2023Q1-Q3 company was 46.02%/7.57%/6.56% respectively, down 0.96/1.26/0.15pct from the previous year. The gross margin of Q1-Q3 company was 73.07%, down 4.15 pct year on year; net profit margin was 12.01%, down 3.43 pct year on year. Looking at Q3 alone, the company achieved operating income of 1,146 billion yuan, a year-on-year decrease of 17.26%, net profit attributable to the parent company of 0.9 million yuan, a year-on-year decrease of 56.03%, and net profit of non-return to the parent company of 72 million yuan, a year-on-year decrease of 61.53%. The company's gross margin was 71.13%, a year-on-year decrease of 5.67 pct. Net interest rate was 7.46%, down 6.99pct year on year.
Research and development of raw materials continues to increase, and many brands of functional skincare products are intensively promoting new companies driven by synthetic biology, establishing a business system for the entire industry chain of bioactive materials, from raw materials to medical terminal products, functional skincare products, and functional foods. In the raw materials sector, the company currently has 7-8 types of collagen under development. It has achieved macromolecular recombinant collagen preparation, and completed the launch of recombinant type III human collagen raw materials in August, which is expected to promote the application of related ingredients in skincare products.
On September 18, the CDE registration status of the company's new standard sodium hyaluronate API was successfully transferred to A. Currently, a total of 4 pharmaceutical-grade sodium hyaluronate raw materials have been approved for listing. In the functional skincare sector, several of its brands officially announced the launch of new products in October. Runbaiyan has launched a new brightening mask, adding NHA and Huaxi's expertise in Icodoin to simultaneously achieve internal and external resistance. Mibel developed the first emergency blue bandage series cream for sensitive skin. It combines multiple repair ingredients to achieve rapid redness, strong water retention, and quick removal of yellowness. Quadi has launched a new Blue Super, which contains 99.99% of patent-grade pure blue copper peptides, 6-fold patented anti-wrinkle peptides, and 90,000 doses of double plant cell essence. Tmall's first pre-sale has accumulated more than 40W boxes.
Investment advice and profit forecasting
The company has gradually become a leading platform company for the entire bioactive substance industry chain in China, with hyaluronic acid as the core and a variety of bioactive substances as a complement, and is driving business development with four major sectors: bioactive raw materials, pharmaceutical terminals, functional skincare products, and functional foods. We expect the company to maintain its “buy” rating for 2023-2025 with EPS 1.70/2.08/2.47 and PE44/36/31X.
Risk warning
Brand incubation falls short of anticipated risks, industry competition heightens risks, and policy supervision risks.