Description of the event
In 2023Q3, the company achieved operating income of 1,146 billion yuan, a year-on-year decrease of 17.26%, net profit of 90 million yuan, a year-on-year decrease of 56.03%, and net profit of 56.03% after deducting non-return net profit of 72 million yuan, a year-on-year decrease of 61.53%.
Incident comments
In the third quarter alone, the company's revenue decline is expected to increase compared to the second quarter due to a slowdown in the performance skincare business.
The operating income of 2023H1 company increased 4.77% year on year, the operating income of 2023Q3 company decreased 17.26% year on year, and gross margin decreased by 5.67 percentage points year on year. The company's revenue growth rate slowed down in the third quarter alone. Cosmetics business: By business, marketing traffic is expected to slow in the third quarter, and the year-on-year growth rate of the cosmetics business is expected to slow; raw materials business: the third quarter is expected to continue the steady trend of the second quarter; medical terminal business: medical aesthetics, orthopedics, and ophthalmology are all expected to maintain rapid growth. Overall, it is expected that the cosmetics business will slow down in the third quarter alone, and the overall revenue growth rate will fall 17.26% year on year.
At the profit level, due to a decline in gross margin, the superimposed management expense ratio increased year-on-year, and the net interest rate after deducting non-net interest fell 7.27 percentage points in the third quarter alone. In the third quarter alone, the company's gross margin fell 5.67 percentage points year on year, or related to the decline in gross margin of the effective skincare business, which accounts for a relatively large share of revenue. The sales expense ratio was optimized, and the management expense ratio increased 2.90 percentage points year on year. It is expected that labor costs will increase, financial expenses will increase 0.64 percentage points year on year, R&D expenses will increase 0.83 percentage points year on year, and comprehensive net profit after deducting net profit of 433 million yuan, down 27.97% year on year, and deducted non-net profit fell 7.27 percentage points year on year.
In terms of product promotion, since the third quarter, the company's cosmetics business has been actively promoted, and the three medical and aesthetic products and equipment products have been approved. In terms of cosmetics in the third quarter, the Runbaiyan brand continued to iterate on new products around the white gauze series, launching white Gauze Essence Spray, White Gauze 2.0, and White Gauze Face Mask 2.0. The Quardy brand launched luster products, and Mibel launched Sandwich Plus Face Mask and Energizing Cream. On the medical and aesthetic side: In October, the “crosslinked sodium hyaluronate gel for injection” declared by the company was successfully approved for sale by the NMPA. It is mainly suitable for this product to be injected under the skin (or under mucous membranes) of the red lip and red body to the cuticle to increase the volume of lip tissue.
Investment suggestions: Since the third quarter, the company has taken the initiative to make strategic adjustments, thoroughly examined business health and sharpened brand acuity. We believe that the market position of the company's raw materials business is stable and broad, and that the effects of medical and aesthetic business transformation and optimization are gradually being realized. We expect the functional skincare business brand tone and product line refinement. The medium- to long-term high-quality development is still worth looking forward to. The 2023-2025 EPS is expected to be 1.78, 2.15, and 2.54 yuan respectively, maintaining the “buy” rating.
Risk warning
1. The launch of the company's new products did not meet expectations;
2. The emergence of new technology replaces the company's original advantages in extracting sodium hyaluronate raw materials.