Matters:

In '23, the company achieved revenue of 2,869 billion yuan, a year-on-year increase of 47.99%, net profit to mother of 1,888 billion yuan, an increase of 47.08% over the previous year, and net profit after deducting non-return to mother of 1,831 billion yuan, an increase of 52.95% year-on-year. Gross profit margin 95.09%, +0.25pct year on year, net profit margin to mother 64.77%, year-on-year -0.40pct. Net cash flow from operating activities was $1,954 million, up 63.67% year over year. It is proposed to distribute a discovery dividend of 2,323 yuan (tax included) per share, using the capital reserve fund to increase 4 shares for every 10 shares; the total cash payment for the whole year is about 900 million yuan, accounting for about 48.5% of the net profit attributable to mother for the whole year.

23Q4 achieved revenue of 699 million yuan, a year-on-year increase of 55.55%, and net profit to mother of 440 million yuan, an increase of 59.00% over the previous year. The gross profit margin was 94.45%, -1.18pct; the net profit margin to mother was 62.97%, +2.58pct yoy.

Commentary:

Hi, I am in good health, and my white color increases. 1) Revenue of solution injection products was 1,671 billion yuan, up 29.22% year on year, accounting for 58.22% of revenue, and sales increased 49%. The sales volume of the Hiti series was steady, with an average price drop of 13%, or structural decline due to excessive downstream competition transmission to upstream and the increase in the company's share of water and light, gross margin +0.24pct to 94.48%. 2) The revenue of gel injection products was 1,158 billion yuan, an increase of 81.43% over the previous year, accounting for 40.35% of revenue. It was mainly due to the increase in volume and price due to sales volume increase of 36%, average price increase of 33%, and gross margin of +0.97pct to 97.49%. In '23, the company continued to expand its marketing team and adjust the marketing system. At the end of the year, there were 449 sales staff, covering 7,000 medical and aesthetic institutions (an increase of about 2,000 compared to the end of '22), accounting for 62.26% of direct sales.

Looking at 24 years, we expect the core growth driver to come from Angel Needle. Wet White + Resheng will continue to be promoted through the license authorization system to maintain its high-end positioning while increasing penetration rate. The growth of the Hi Sports series is mainly due to the sinking expansion of sales channels, and the further strengthening of the market position under the scarce water light license.

There are sufficient pipelines, and continuous investment in R&D. Currently, the company's Bonida (chin indications) approval applications and botulinum toxin approval applications have all entered the registration process and are expected to be approved in 24-25; the phenolidocaine butacaine cream is in the clinical stage; it is cooperating as an energy source device under Jeisys in Korea to expand ultrasound and radiofrequency categories; and the weight management field includes simeglutide and deoxycholic acid injections, all of which are in the pre-clinical development stage.

The company continues to invest in R&D. Currently, R&D personnel account for 26.7% of the company's total personnel, R&D investment accounts for 8.72% of revenue in '23, and R&D investment increased by 44.49% year-on-year, supporting the company's product matrix construction.

Investment advice: Currently, market competition is intensifying and regulations continue to be stricter. Downstream needs to balance customer acquisition and profits, or have a certain impact on upstream shipments. Based on this, we lowered the company's net profit from mother to 24.2, 31.4, and 3.94 billion yuan in 24-26 years, up 30.2%, 29.7%, and 25.5% year-on-year (August 23 is expected to return to mother net profit of 26.1 and 3.52 billion yuan for 24-25), corresponding to PE about 30/23/18 times. The company's multi-pipeline products will be approved for listing after 25 years. The integrity of the product matrix will further reflect its advantages under platformization. It is recommended to take a longer period of time to look at the company's valuation, referring to the optional consumer valuation level and the consolidated company's net profit from 23 to 26 about 28.5%, which is 28 times over 25 years, and the target price is 406 yuan, giving it a “recommended” rating.

Risk warning: competitive products approved for listing, safety emergencies, increased regulation, etc.