Incidents:
The company released its 2023 annual report.
Comment:
Net profit for the year increased 47% year over year, and gross margin remained high
In 2023, the company achieved operating income of 2,869 billion yuan, a year-on-year increase of 47.99%, achieved net profit of 1,888 billion yuan, a year-on-year increase of 47.08%, and realized net profit without deduction of 1,831 billion yuan, an increase of 52.95% over the previous year. In terms of profitability, the company's gross margin in 2023 was 95.09%, up 0.25pct year on year, and net margin was 64.77%, down 0.61 pct year on year. In terms of cost ratio, the total cost rate for the 2023 period was 20.93%, a year-on-year decrease of 0.53 pct. Among them, the sales expense ratio was 9.07%, up 0.68pct year on year; the management expense ratio was 5.03%, down 1.44pct year on year; and the R&D expense ratio was 8.72%, down 0.21pct year on year. By the end of '23, the company had more than 400 sales and marketing personnel, covering about 7,000 medical and aesthetic institutions in China, an increase of about 2,000 over '22.
Injection products are growing steadily, and epitaxial layout is expected to achieve synergy. In terms of injections, by product, solution injection products achieved revenue of 1,671 billion yuan, a year-on-year increase of 29.22%, with sales volume of 5.1413 million units, a year-on-year increase of 48.88%, gross profit margin of 94.48%, with a year-on-year increase of 0.25 percentage points. Among them, the Hi-Body series maintained steady growth under a high base; the revenue of gel injection products was 1,158 billion yuan, up 81.43% year on year, with sales volume of 1.068 million units, up 36.13% year on year. The gross profit margin was 97.49%, an increase of 0.97 percentage points over the previous year. Among them, with strong product strength, Wet White Angel became a favorable support for building a product matrix, and new products such as Living Angel contributed to the increase. In terms of optoelectronics, the company is actively expanding the energy source equipment pipeline and signed a distribution agreement with Korea's Jeisys to introduce two non-invasive skin anti-aging instruments Density and Linearz, which are already commercialized in Korea. It is expected to jointly launch comprehensive solutions with existing products, and joint applications to meet various beauty choices.
The company has an extensive inventory of products under development, and has invested in the field of bioenhanced fat loss with peptides. The company's products include 5 types of pharmaceuticals and biological products and 3 medical devices. Among them, injectable botulinum toxin and modified sodium hyaluronate gel containing medical polyvinyl alcohol gel microspheres are in the registration phase; second-generation facial implants and lidocaine decaine cream are in clinical trials; and injectable hyaluronidase is in the pre-clinical research stage. In addition, with a total investment of 50 million yuan, the company holds 4.89% of the shares in peptidebio and cooperates to introduce simeglutide products, which is expected to further strengthen its future layout in the field of weight management and fat loss. The product is currently in pre-clinical research.
Investment advice and profit forecasting
The company is one of the leading domestic medical and aesthetic upstream manufacturers, and the differentiated product matrix fully enjoys the dividends of the industry. We expect the company to achieve an EPS of 11.63/15.14/19.10 yuan in 2024-2026, PE30/23/18x, and maintain a “buy” rating.
Risk warning
Risk of product promotion falling short of expectations, policy risk