Event: The company released its 2023 performance forecast: It is expected to achieve net profit of 200-250 million yuan in 2023, an increase of 835.99%-1069.99% over the previous year, and achieve net profit without deduction of 19-240 million yuan, an increase of 2866.44%-3647.08% over the previous year. Looking at Q4 alone, it is estimated that 23Q4 will achieve net profit of 0.06-0.56 billion yuan, net profit without deduction of 0.15-0.65 million yuan, and non-recurring profit and loss of -9 million yuan in 23Q4.
The performance of the company's three major businesses is improving. The main reasons for the year-on-year increase in the 2023 performance compared to the same period of the previous year are: (1) the revenue/profit scale of the company's women's clothing and medical and aesthetic business increased significantly compared to the same period of the previous year; (2) the women's clothing sector actively followed market changes and adjusted its business strategy to improve performance through marketing and embracing new retail; (3) the new institutions in the medical and aesthetic sector brought new results and overall performance improvements in the new institutions of the same caliber; (4) the business performance of the green baby business increased steadily along with the steady increase in market share.
We expect the profitability of the women's clothing & baby business to continue to improve in 23Q4, and that non-recurring losses may have a slight impact on Q4 performance.
Newly acquired medical and aesthetic institutions have all fulfilled their performance promises, and mature medical and aesthetic institutions are expected to continue to contribute considerable profits in the future. In 2023, Kunming Han Chen (holding 75% of shares) had net profit of 16.3872 million yuan/yoy +10.7%, and net profit for 2023 was 16.7617 million yuan/yoy +10.5%. In 2023, Wuhan Wuzhou (holding 90% of shares) achieved net profit/net profit of 1743.40/178.586 million yuan, and Wuhan Han Chen (holding 70% of shares) achieved net profit/net profit of 990.10/10.230 million yuan, all of which fulfilled the 2023 performance promise. According to the company's previous revenue forecasts and performance promises, it is expected that net interest rates in the medical and aesthetic sector will continue to be optimized in the future as the group size effect empowers new institutions.
Profit forecast and investment rating: The profit performance of the clothing & baby business is improving. The medical and aesthetic business adheres to the layout of epitaxial+endogenous expansion. Wuhan Wuzhou & Wuhan Han Chen combined to increase profits and further advance the company's medical and aesthetic business nationwide layout. It is expected that in the future, as the profits of new institutions climb and the group size effect becomes more prominent, the profitability of the medical and aesthetic business may continue to improve. We predict that the company's net profit for 2023-2025 will be 237/3.09/353 million yuan, respectively, and the corresponding PE will be 33/25/22X, respectively, maintaining the “gain” rating.
Risk factors: Consumption recovery falls short of expectations, and competition in segmented racetracks intensifies.