Company announcement: 23Q1-Q3 achieved revenue of 4,221 million yuan/ -2.29%, net profit of 514 million yuan/ -24.07%, net profit of 433 million yuan/ -27.97%, net profit of 433 million yuan/ -27.97%; of these, 23Q3 achieved revenue of 1,146 million yuan/ -17.26%, net profit of 90 million yuan/ -56.03%, net profit of 72 million yuan/ -61.53%.
The cosmetics business may continue to be under pressure, and the medical and aesthetic business may grow further. We believe that the functional skincare business may continue to be under pressure. The main reasons are: 1) consumption is weak and consumers' willingness to buy skincare products tends to be conservative; 2) online traffic dividends are slowing down and traffic costs are getting higher; 3) the company's internal organizational structure and operation management need to be further upgraded. In the medical and aesthetic business, Runzhi Micro Crosslinked Doll Needles continues to be a hit in the industry with the promotion idea of compliance, long-term effectiveness, and versatility; the filler products, Runzhi Single Phase Natural, and Runzhi Dual Phase No. 2, No. 3, and No. 5 products, continue to promote family hierarchical anti-aging by lowering the threshold for filling treatment and increasing customer satisfaction. Currently, the trend of compliance in Shuiguang continues to increase. We believe that the company is expected to seize the regulatory dividends of the Shuiguang market and continue to promote sales of Runzhi doll needles. In terms of raw materials business, the company has transitioned from providing products to providing services, and has reached cooperation with many customers in the fields of customized development and product innovation, and may grow steadily.
On the gross profit side, the 23Q3 company's comprehensive gross profit margin was 71.13% /yoy-5.67pct, -2.68pct, month-on-month; on the cost side, the 23Q3 period cost rate was 63.21% /yoy+3.55pct, +5.51 pct, of which the sales/management/R&D/finance rates were 45.58%/9.97%/7.89%/-0.23%, year-on-year respectively -0.82/+2.90/ +0.83/+0.64pct, month-on-month /+0.69pct; On the profit side, 23Q3 returned a net profit margin of 7.84% /yoy-6.91 pct, -4.82 pct month-on-month.
Looking forward to the future, we believe: 1) It is expected that after the company rationalizes the management mechanism, functional skincare products are expected to return to a growth path, and management and R&D rates are expected to be better controlled; 2) Run Baiyan is expected to reshape the upgraded brand and occupy the “hyaluronic acid repair” track; Quadi may create domestic products on the anti-aging race track; Muscle Active is expected to continue to enrich the brown rice series, or develop other product lines for young oily skin; Mirbe may create sensitive skin stabilization experts to further develop advanced products with sensitive skin; 3) Medical and aesthetic products with advanced benefits for sensitive skin; 3) The business is expected to enjoy the dividends of Shuiguang's market supervision through doll needles and achieve Further growth. 4) The company has carried out research projects on various bioactive substances based on synthetic biology technology and achieved certain results. Currently, the company lays out recombinant collagen raw materials and products, which may be expected to open up a second growth curve.
Profit forecast and investment recommendations: We expect the company's net profit from 2023-2025 to be 889/11.19/1,352 million yuan respectively, and the PE corresponding to the closing price on November 3 will be 41/33/27 times, respectively, maintaining the “increase in holdings” rating.
Risk factors: New synthetic biology business expansion is falling short of expectations, rising traffic costs affect profit margins, functional skincare business adjustments fall short of expectations, etc.