Core views:
The apparel business recovered rapidly, and the medical and aesthetic business became the company's largest business segment. According to the company's 2023 three-quarter report, 23Q1-3, the company achieved revenue of 3.694 billion yuan, +22.06% year-on-year, net profit of 194 million yuan, +585.75% year-on-year, and net profit of 175 million yuan after deducting non-return net profit of 175 million yuan, +459.78% year-on-year. According to the investor relations records disclosed by the company, by business, women's clothing, medical beauty, and children's clothing achieved revenue of 13.76/15.89/720 billion yuan, +24.96%/+19.83%/+11.98% over the same period last year. In 23Q3, the company achieved revenue of 1,216 billion yuan, +23.94% year-on-year, net profit of 47 million yuan, +339.57% year-on-year, net profit of 36 million yuan after deducting non-return net profit of 36 million yuan, +274.83% year-on-year.
Profitability improved significantly year over year, and the effect of controlling expenses during the period was remarkable. The gross margin/net interest/net profit margin of the 2023Q1-3 company is 57.58%/5.73%/4.72%, year-on-year +0.21/4.81/-0.25pct, of which 23Q3 gross margin/net profit/net profit/net profit deduction non-net profit ratio is -1.84%/+3.70%/+2.72%. The decline in Q3 gross profit is expected to be mainly due to companies in July and Wuhan Hanchen and Wuhan Wuzhou, where the share of medical and aesthetic business revenue is low; the month-on-month decline in net profit is expected to be mainly due to Shenzhen Milan stores and newly merged institutions, with slight profit delays。 In terms of expenses, the sales/management/R&D expense ratio of 23Q1-3 company was 40.91%/8.01%/1.85%, year-on-year -1.16/-0.64/-0.93pct.
The scale of the medical and aesthetic business continues to expand, and competitiveness is continuously enhanced. The company's acquisition of Wuhan Wuzhou and Wuhan Han Chen is expected to further optimize and improve the financial situation of the medical and aesthetic business, and continue to increase the scale of medical and aesthetic medicine. According to the investor relations records disclosed by the company, as of the end of the 23Q3 period, the company had successively set up 7 medical and aesthetic mergers and acquisitions funds, with a fund size of 2,837 billion yuan. Driven by both endogenesis and extension, it is conducive to enhancing the scale and competitiveness of the company's medical and aesthetic business and further accelerating the national layout.
Profit forecast and investment recommendations: The 2023-2025 results are expected to be 0.48 yuan/share, 0.67 yuan/share, and 0.93 yuan/share, respectively. Adopting the segmented valuation method, we maintain the judgment that the company's reasonable value is 31.48 yuan/share, corresponding to 47XPE in '24. Maintain a “buy” rating.
Risk warning. Risk of intense clothing competition; risk of falling medical and aesthetic valuations; business model risk.