Description of the event
The company released its 2023 annual report. During the period, it achieved revenue of 2,869 billion yuan (+47.99%), net profit to mother of 1,888 billion yuan (+47.08%), net profit of non-return to mother of 1,831 billion yuan (+52.95%), and achieved the 2023 equity incentive target; EPS of 8.6 yuan. It is proposed to pay a cash dividend of 23.23 yuan (tax included) to all shareholders for every 10 shares, and 4 additional shares for every 10 shares. 2023Q4 achieved revenue of 699 million yuan (+55.55%), net profit attributable to mother of 400 million yuan (+59%), and net profit after deducting non-return to mother of 436 million yuan (+87.73%).
Incident reviews
Solution products achieved a growth rate of nearly 30% under a high base. Gel products achieved both breakthroughs in revenue and high gross margin, and the cosmetics business volume was obvious. Solution injection products achieved revenue of 1.67 billion yuan (+29.22%) during the period, accounting for 58.21% of revenue (-8.46pct), production and sales ratio of 104.39% (+19.36pct), and gross profit margin of 94.48% (+0.25pct). Gel injection products achieved revenue of 1,158 billion yuan (+81.43%), accounting for 40.35% (+7.44pct), and a gross profit margin of 97.49% (+0.97pct). The revenue of the facial implant line was 5.92 million yuan (+10.06%). Other products, mainly cosmetics, increased significantly, achieving revenue of 35 million yuan (+1265.8%). The company launched 3 skincare brands during the period, Aifuyuan, Hi Ti Skincare, and Hi Ti Panda Skincare, covering key skin care areas of the face, neck and eye area to be used as professional skin repair and care products after medical and aesthetic treatments.
The company continues to increase R&D investment, and R&D personnel and R&D expenses have increased markedly, enriching the product pipeline. R&D personnel increased by 34.25% year on year, and R&D expenses increased by 44.490% year on year, basically in sync with revenue growth. During the period, the company added 2 new certified medical devices, namely bioprotein sponges for Class III medical devices, for tissue repair and healing such as wounds, and Class II medical devices hemostasis and healing additives for hemostasis and healing of surgical incisions, etc. Three models have entered clinical and registration procedures. Currently, botulinum toxin type A for injection has entered the registration stage, liraglutide injections have completed phase I clinical trials, and lidocaine butacaine cream is in phase III clinical trials. Three preclinical projects, namely deoxycholic acid injection, hyaluronidase, and simeglutide injection, are expected to be submitted for clinical trials in 2024.
The number of medical and aesthetic institutions covered continues to rise, and the revenue growth rate in the South China market is over 60%. At the end of the period, the company had more than 400 sales and marketing personnel (an increase of about 100 over the same period last year), covering about 7,000 domestic medical and aesthetic institutions (an increase of about 2,000 over the same period last year), and the direct sales/distribution model accounted for 62.26%/37.74%. Regionally, East China is still the company's main sales area, achieving revenue of 1,231 million yuan (+40.36%), Southwest China revenue of 368 million yuan (+55.41%), North China revenue of 357 million yuan (+36.33%), South China's revenue of 357 million yuan (+60.5%), and Central China's revenue of 336 million yuan (+58.72%).
The company's gross profit margin of 95.09% (+0.25pct) remained high during the period, and the net profit margin of 64.65% (-0.73pct) declined slightly. The overall expense ratio was 12.21% (-0.32pct), of which the sales expense ratio was 9.07% (+0.68pct), which was an increase in labor costs and marketing activity expenses during the period; the management fee ratio of 5.03% (-1.44pct) was due to a combination of reduced Hong Kong stock listing expenses in the current period; the R&D expense ratio was 8.72% (-0.21pct); and the financial expense ratio -1.89% (+0.44pct) was an increase in interest income on time deposits. Net cash flow from operating activities of $1,954 million (+63.67%) represents an increase in sales and repayments in the current period.
Investment advice
The popularity of light medical and aesthetic consumption continues to rise, and the Chinese people's demand for anti-aging and skin care continues to be released. The company has a wealth of certified products and ongoing research projects, which can meet different medical and aesthetic needs. Solution products such as Hi Body have been deeply involved in the medical and aesthetic market for many years, and have a broad consumer base and recognition; the penetration rate of gel products in the wet white angel market continues to increase, gradually contributing to the company's second performance growth, and is expected to meet the differentiated facial lift demands of high-end beauty seekers during the year; injectable A botulinum toxin has entered the registration and reporting stage; in terms of instruments, the company cooperates with Jeisys of Korea to introduce 2 non-invasive anti-aging devices for the skin to achieve a breakthrough in the energy source equipment pipeline. We expect the company's 2024-2026 EPS to be 11.46\ 15.52\ 18.99 yuan respectively, corresponding to the company's closing price of 352.91 yuan on March 19, and the 2024-2026 PE will be 30.8\ 22.7\ 18.6 times respectively, maintaining the “buy-B” rating.
Risk warning
Policy control risk; risk of product development registration falling short of expectations; risk of product quality and safety issues; risk of increased market competition; risk of consumer purchasing power falling short of expectations.