Financial indicators fluctuated greatly due to the divestment of real estate, and net profit attributable to the mother exceeded the forecast limit. The company achieved revenue of 4.579 billion yuan (yoy -64.65%) in 2023, mainly due to the divestment of the real estate business, with net profit of 305 million yuan (yoy +567.44%), which exceeded the previous performance forecast limit, after deducting net profit of 139 million yuan and yoy +137.40%. Mainly investment income of 142 million yuan from the real estate business divestment was confirmed as non-recurring profit and loss. Among them, the cosmetics and pharmaceuticals business achieved net profit of 231 million yuan (yoy +12.93%), and the real estate business and asset divestment affected net profit of 73.97 million yuan. In terms of profitability, the company's gross margin/net profit margin to mother in 2023 was 46.49%/6.63%, respectively. +21.84 pcts/+6.28 pcts, mainly due to a decrease in the share of low-margin real estate business. Sales/management/R&D expenses were 31.59%/4.87%/3.35%, respectively, and +21.45pcts/+2.17pcts/+2.32pcts. Among them, the increase in sales rates was mainly due to an increase in the sales scale of cosmetics and other businesses.
The cosmetics business is growing steadily, promoting the upgrading of collagen and medical and aesthetic layout to a new ecosystem between the two US countries. In 2023, the cosmetics business achieved revenue of 2,416 billion yuan (yoy +22.71%), and gross margin increased by 1.16 pcts year over year to 62.13%. Among them, the revenue of the Yilian/Dr. Aier brand was 857 million/1,348 million yuan, respectively, +20.35%/+27.33%. Relying on core R&D technology in the field of hyaluronic acid, we continue to empower brand promotion, focusing on skin microecology, specialty plant resources, and collagen, and strengthening innovation reserves. During the period, 67 new patents were applied for (including 33 invention patents), 55 newly authorized patents, and 152 products were launched. The company's cosmetics business continues to promote a large-scale product strategy. The Yilian brand focuses on the “hyaluronic acid moisturizing and repair” mentality to increase the sales share of second-tier products such as face cream on the basis of maintaining the market share of spray. Dr. Eyre's brand continues to occupy the microecological skincare circuit. The two major product lines, the Flash Charge and Probiotics series, have upgraded and expanded the Shake Series, the Clear Skin and Oil Control series, and added new sunscreen products and channel customized products. Create a super-sized microcrystalline water product to reach new audiences with a shaking essence. In terms of channels, in 2023, the company's skincare business had online channel revenue of 2,114 billion yuan (yoy +20.35%), accounting for 87.5%, and offline channel revenue of 302 million yuan (yoy +42.30%). The company optimized the global marketing system, focusing on the Dabao+Self-broadcast two-wheel drive to expand offline markets and private traffic. In addition, in 2023, the company completed infrastructure construction of an intelligent production base for collagen medical devices, realized trial production of recombinant humanized collagen raw materials, promoted the filing of recombinant humanized collagen raw materials, launched the medical and aesthetic brand KeMi. The brand development strategy was upgraded to “5+N”, and upgraded from a single main beauty business to a new ecosystem of “health beauty+medical beauty”. The new brand Kemi focuses on lightening the medical and aesthetic perioperative period, creating the foundation for the development of Shuangmei's new ecosystem as a second growth curve.
The raw materials business promotes the registration of APIs and the expansion of application scenarios, and the pharmaceutical business is looking forward to a return to steady growth. In 2023, the raw materials, derivatives and additives business achieved revenue of 351 million yuan (yoy +23.16%), and gross margin decreased by 1.76pcts to 32.31%. Promote the registration of various APIs at home and abroad and expand the application scenarios of raw materials, and accelerate the application and promotion of hyaluronic acid in FMCG products, as well as the application and promotion of icedoin and polyglutamic acid in agriculture. Sales volume of oral beauty products increased 3 times over the same period. In 2023, the company's pharmaceutical business achieved revenue of 520 million yuan (yoy +1.61%), increased gross margin by 0.39 pcts to 53.39% year on year, expanded the functional food layout, completed the launch of 18 new products during the period, built a CDMO (pilot testing and production transformation) platform for pharmaceuticals, and introduced 8 cooperative projects. Continue to expand sales channels such as hospitals, primary medical institutions, pharmacy chains, etc., and expand new pharmaceutical retail business models through online channels, and look forward to a return to steady growth.
Profit forecasting and investment advice. The company focuses on the upgrading and transformation of the health business, and the brand potential is developing well. Based on the annual report, we adjusted our forecast for 2024-2026 revenue of 46.55/ 56.07/6.656 billion yuan, respectively, and net profit to mother of 3.73/4.95/552 million yuan, respectively, +22.9%/+32.8%/+11.6% year-on-year, corresponding to 23XPE in 2024, maintaining a “buy” rating.
Risk warning: the risk of policy changes, increased industry competition, and the risk of new product promotion falling short of expectations.