Incident: The company disclosed its report for the third quarter of 2023. The first three quarters of 2023 achieved revenue of 4.221 billion yuan, -2.29%, net profit of 514 million yuan, -24.07%, net profit after deduction of 433 million yuan, -27.97% year-on-year, and net sales margin of 73.07%/12.01%, respectively, -4.16t/pc-3.43pct, year-on-year. In 23Q3, the company achieved revenue of 1,146 billion yuan, -17.26% year-on-year, net profit of 89.7922 million yuan, -56.03%, net profit of 72.3612 million yuan, net profit of 72.3612 million yuan, year-on-year -61.53%, and gross sales margin/net sales margin of 71.13%/7.46%, respectively, compared with the same period last year, -5.67pct/-6.99pct.
Q3 The fee rate increased significantly, and the sales expense ratio was optimized. The gross margin/net profit margin from 2023Q1 to Q3 was 73.07%/12.01%, respectively, and -4.16%/-3.43% year-on-year, both of which declined to a certain extent. The sales/management/R&D expense ratio for the first three quarters was 46.02%/7.57%/6.56%, with year-on-year changes of -0.96pct/+1.26pct/+0.15pct, respectively, and 23Q3 sales/management/ R&D expense rates of 45.58%/9.97%/7.89% respectively, year-on-year changes of -0.82pct/+2.9pct/+0.83 pct, respectively. The overall cost rate rose, and the sales expense ratio was optimized.
The four major businesses developed collaboratively, and the skincare business strategy was adjusted. The company has established a full-industry chain business system 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 already 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. In the medical and aesthetic sector, in October 2023, the company's injectable crosslinked sodium hyaluronate gel was approved for sale. The indications are for injection into the lips to increase the volume of lip tissue and further enrich the company's medical and aesthetic product matrix. In the skincare sector, affected by various aspects such as weak consumption, the company has taken the initiative to make strategic adjustments and carry out overall changes in products, R&D, channels, etc. The short-term growth rate has slowed down, and it is expected that it will return to a growth path in the future.
Investment advice: The company is a leading platform company for the entire bioactive compounds industry chain in China. It is expected to resume a good growth momentum through product and channel optimization. Appropriately adjusted for 2023-2025, the company's operating income was 63.45/74.48/9.012 billion yuan, net profit was 8.34/9.65/1,250 billion yuan, corresponding EPS was 1.73/2.00/2.59 yuan, and the corresponding stock price on November 9, 2023 was 45.1/39.0/30.1 times, maintaining the “increase in holdings” rating.
Risk warning: increased market competition, risk of brand incubation falling short of expectations, risk of policy regulation, and Huaxi Biotech is a market-making company for the Societe Generale Securities Science and Technology Innovation Board.