Event: The company released its 2023 three-quarter report. 23Q1-Q3 achieved operating income of 3.694 billion yuan, +22.06% year-on-year; net profit of 194 million yuan, +585.75% year-on-year. 23Q3 achieved revenue of 1,216 billion yuan, +23.94% year-on-year; net profit of 46.8 million yuan, +339.57% year-on-year.
Comment:
Various medical and aesthetic brands achieved relatively rapid growth. Wuhan Wuzhou and Wuhan Han Chen joined in Q3. 23Q1-Q3 medical and aesthetic business revenue increased 19.8% to 1,589 billion yuan, gross margin increased by 9.5 pcts to 54.6%, and net profit from the mother increased by 58.9% to 84.47 million yuan. By brand, 23Q1-Q3 Milan/Jingh/Gao Sheng/Han Chen/Wuhan Wuzhou achieved revenue of 7.6/3.1/1.4/2.5/170 million yuan, an increase of 28.8%/23.1%/28.7%/18.2%/9.9% respectively. The post-epidemic consumption scenario resumed, and the company's medical and aesthetic brands achieved rapid revenue growth; gross margin increased 2.9/6.4/6.1/4.4/6.9pcts; net profit was 135/786/680/2379/1371 million yuan, respectively, achieving rapid growth. The company has accumulated a set of relatively scientific and complete customer drainage, medical diagnosis and treatment, business processes and after-sales service systems, and has a replicable management model for medical and aesthetic institutions. The company has successively set up seven medical and aesthetic mergers and acquisitions funds, with an overall fund size of 2,837 billion yuan. During the period, Wuhan Wuzhou and Wuhan Han Chen joined forces.
Revenue from the apparel business grew steadily, and profits recovered significantly. By business, the women's and children's clothing business of 23Q1-Q3 achieved revenue of 1,376/7.2 billion yuan, an increase of 25%/12% respectively; gross margin was 59.4%/60.2%, respectively, of -3.9/+1.6 pct; and net profit of 8648/1.07 million yuan, respectively, with a year-on-year increase of 330.1%/56.8% respectively. The rapid development of new women's clothing retail business has led to rapid growth in online channels. The decline in gross margin is expected to be mainly due to an increase in the share of online revenue, and profits have clearly recovered.
Cost and expense control is strong, and profitability is improved. The gross margin of 2023Q1-Q3 company was +1pct to 57.6% year-on-year, mainly due to a significant increase in medical and aesthetic gross margin. The company effectively controlled costs through measures such as improving the application of self-developed products and improving human efficiency. Sales/management/R&D/finance cost rates were -1.2/-0.6/-0.9/-0.4pcts to 40.9%/8%/1.9%/1.8% respectively. After the epidemic, companies increased their advertising efforts and expanded the number of personnel in the medical and aesthetic sector, but revenue increased faster than expenses, and the period rate was optimized. Investment income during the period was $52 million ($29 million in the same period last year), mainly due to increased investment income of participating companies and income from disposal of long-term equity investments. Under the overall influence, net interest rate was +4.3pcts to 5.2%.
Investment advice: With the recovery in consumption, all business segments of the company achieved relatively rapid growth. Under the positive influence of operating leverage, the performance was impressive. Taking into account the merger of Wuhan Wuzhou and Wuhan Han Chen, we raised our profit forecast. The net profit for the year 23/24/25 is expected to be 2.5/33/ 4.1 billion yuan (the original forecast was 2.2/30/3.9 billion yuan), corresponding to the current market value PE of 37/29/23 times, maintaining the “increase in holdings” rating.
Risk warning: Consumption recovery falls short of expectations, incubation of out-of-body institutions falls short of expectations, and industry competition is intensifying.