Introduction to this report:
The three major businesses grew rapidly in 2023, and the company's profit improved significantly; recently, the company plans to acquire Jimei, Zhengzhou to continue to promote endogenous and epitaxial expansion, and performance flexibility is expected to continue to be unleashed in 2024.
Key points of investment:
Investment advice: Considering that the company's profit recovery exceeded expectations, the 2023-2025 EPS forecast was raised to 0.51/0.71/0.91 yuan (0.42/0.64/0.81 yuan before adjustment). Considering that the company's performance elasticity was excellent but terminal consumer demand was weak, the valuation center of the medical and aesthetic industry declined, the company was given a PE 30 times higher than the industry average in 2024, and the target price was lowered to 21.6 yuan to maintain the “gain” rating.
Revenue grew rapidly in 2023, and the company's profit improved significantly. In 2023, benefiting from the recovery of the post-pandemic consumer environment, the apparel and medical and aesthetic business grew steadily. 2023H1 medical/aesthetic/womenswear revenue was 9.1/91/4.7 billion, +25%/+22%/+16%, and Q3 company revenue continued to grow at a relatively rapid rate of 23%. Q1-3 gross margin was +1.0pct year over year, and net margin was +5.7pct year-on-year, and profit recovered significantly. According to the performance forecast, it is expected to achieve net profit of 200-250 million yuan in 2023, an increase of 836%-1070% over the previous year.
The rapid expansion of endogenous and epitaxial medical and aesthetic businesses is expected to gradually contribute to more growth in performance. In terms of epitaxial expansion, the company successively acquired Wuhan Wuzhou and Wuhan Han Chen in 2023. According to performance promises, the company plans to acquire 100% of the shares in Jimei, Zhengzhou in cash in February 2024, and the agency achieved a profit of 7.69 million yuan for the first time in 2023, corresponding to a net interest rate of 7.3%. According to performance promises, deducted non-net profit in 2024 will not be less than 10.54 million yuan (yoy +37%); in terms of endogenous growth, Jingskin Medical Beauty is steadily expanding stores, and the revenue and profits of Shenzhen Milan are steadily climbing. It is expected to contribute to more incremental performance.
The women's and children's clothing business is performing steadily and is expected to continue to perform well in 2024. 2023H1 has +18/-40 self-operated/retail stores compared to the beginning of the year, thanks to high online revenue growth and rapid offline same-store revenue growth. Women's clothing H1 revenue is expected to increase 25%, and H2 and 24 are expected to continue the good trend; the 2023H1 children's clothing own/dealership stores are +11 homes/-7 compared to the beginning of the year. Thanks to the good performance of the same stores, the revenue side is expected to grow steadily throughout the year, and is expected to remain steady in 2024. Furthermore, the company's cost-side controls are good, profits are improving steadily, and performance flexibility is expected to continue to be unleashed.
Risk factors: The expansion of stores fell short of expectations, and the profits of new medical and aesthetic institutions fell short of expectations