Incident: Giants Biotech reveals 2023 results. In '23, the company achieved revenue of 3,524 billion yuan, yoy +49.05%; adjusted net profit (excluding share payment fees) was 1,469 million yuan, yoy +39.04%. 23H2, the company achieved revenue of 1,918 billion yuan, yoy +39.07%; adjusted net profit of 792 million yuan, yoy +33.56%.
Revenue from professional skin care products was +51.1% over the same period in 23 years. However, the volume of Fumei Star products continued to increase, and improvements can be expected from Klein. The company achieved total revenue of 3,524 billion yuan, +49.05% year over year, of which: 1) Professional skin care products achieved revenue of 3,508 billion yuan, +51.10% year over year, of which effective skincare revenue was 2,647 billion yuan, +69.52% year over year, mainly due to the company continuing to strengthen omnichannel marketing activities, steady revenue growth of large single products and rapid growth of star products; medical accessories revenue of 861 million yuan, +13.25% year over year; by brand: ① Kefumei achieved revenue of 2,688 million yuan, year on year + 72.86%, mainly due to continuous expansion of online and offline sales channels, optimization of operating strategies, continued to increase brand influence, while further expanding product categories to categories such as essences, masks, lotions, etc., and sales of star products such as collagen sticks were high (“618” and “Double 11” collagen stick GMV increased 700% +/ 200% + year over year, respectively) contributed to revenue growth; ② Crekin achieved revenue growth in 23 years, and the product matrix was updated and iterated, and the product matrix was updated and iterated. Refreshing bowling cream and large mask Wang and the new film eye cream are also optimizing and adjusting the channel structure, strengthening public channel construction, and continuing to establish brand mentality. We look forward to seeing the results of brand adjustments in 24 years; ③ Other brands: achieved revenue of 103 million yuan, yoy +14.29%. 2) Health food and others achieved revenue of 16 million yuan in 23 years, -62.53% year-on-year.
Direct sales revenue in '23 was +72.7% year-on-year to 2.42 billion yuan, and online channels such as Douyin saw impressive growth. By channel, 1) Direct sales channels: The company's direct sales revenue in '23 was 2,421 billion yuan, yoy +72.72%, of which, through DTC stores, online sales revenue of 2.55 billion yuan, yoy +77.49%, mainly due to ① The company continued to strengthen its online multi-platform layout and refined operation, and e-commerce platforms such as Tmall and Douyin grew rapidly. According to the company announcement, Kefumei and Colijin's online omni-channel GMV increased 165% +/ 70% + year on year respectively in “618” in '23. +/ 50% +; ② The rapid rise of essential products contributed to revenue growth; ③ Brand marketing and promotion increased brand awareness and promoted sales and revenue growth; online direct sales revenue for e-commerce platforms in '23 was 178 million yuan, yoy +42.57%, mainly due to the company's continuous optimization of platform marketing strategies and product structure to drive sales and revenue growth; the company's offline direct sales revenue in '23 was 89 million yuan, compared to +371.85%, mainly due to the company continuing to increase the store and product layout of offline direct sales channels such as pharmacy chains and cosmetics chains. Strengthen store marketing activities and personnel training; 2) Distribution: The company's distribution revenue in '23 was 1.104 billion yuan, yoy +14.60%.
The gross margin/adjusted net profit margin for '23 was 83.6%/41.7%, respectively. In 23, the company achieved gross profit of 2,947 billion yuan, corresponding gross margin of 83.6%, -0.8 pct year on year, mainly due to increased sales costs and product type expansion; in terms of cost ratio, in 23, the company's sales expenses ratio was 33.04%, +3.17pct year on year, mainly due to the rapid expansion of the company's online direct sales channels; the management fee ratio was 2.74%, -1.95pct year on year, mainly due to the reduction in listing expenses; the R&D expense ratio was 2.13%, +0.26pct year on year, mainly due to the company's continuous investment base Research and pipeline product development and R&D personnel salaries have increased. 3) In terms of net interest rate, the company's adjusted net profit in '23 was 1,469 million yuan, corresponding to an adjusted net interest rate of 41.7%, -3.0 pct year on year.
Investment advice: Relying on deep R&D strength, the company continues to build a multi-brand matrix. The product matrix for effective skincare products continues to be rich, and the future of medical and aesthetic products can be expected; through continuous investment in R&D technology, the first-mover advantage and refined operation to successfully create large single products while continuing to enrich the product pipeline and strengthen publicity efforts to continuously enhance brand influence. We expect adjusted net profit for 24-26 to be 18.14/22.77/28.23 billion yuan, with a year-on-year growth rate of 23.5%/25.5%/24.0%. The current stock price corresponds to PE in 24-26, respectively 21x, 17x, 14x, maintaining the “Recommended” rating.
Risk warning: Industry competition intensifies; new product development progress falls short of expectations; industry regulation exceeds expectations.