The company achieved net profit of 225 million yuan (+953%) in 2023, in line with expectations. The company issued an annual report: in 2023, it achieved revenue of 5.145 billion yuan (+24.4%, same below) and net profit to mother of 225 million yuan (+953.4%), in line with expectations. Considering the intense competition in the industry, we lowered 2024-2025 and added a profit forecast for 2026. We expect the company's net profit to be 3.16 (-0.04) /3.89 (-0.21) /465 million yuan in 2024-2026, corresponding EPS of 0.71 (-0.01) /0.88 (-0.05) /1.05 yuan, and the current stock price corresponding to PE is 22.8/18.5/15.5 times. We believe that the company is a leading regional medical and aesthetic institution. The epitaxial merger and acquisition process continues to advance, the national layout continues to accelerate, the valuation is reasonable, and the “buy” rating is maintained.
The medical and aesthetic business grew well, with customized products+scale effects driving increased profitability: achieved revenue of 2.127 billion yuan (+27.8%) and gross profit margin of 53.2% (+3.3pct) in 2023; by type, surgery/non-surgical projects achieved revenue of 347 million yuan (-3.0%)/1,780 billion yuan (+36.2%), with gross margins of 48.3% (-4.3pct)/54.1% (+5.0pct), customized products+scale effects driven gross margin growth for non-surgical projects; by brand Looking, Milan Bai Yu, Gao Sheng, Jing Skin, Han Chen, and Wuzhou achieved revenue of 10.11/1.52/4.05/3.41/218 billion yuan respectively, or +29.2%/+27.6%/+30.8%/+20.6% over the same period last year, all growing well. Women's clothing: Revenue of 1.984 billion yuan (+29.3%) and gross profit margin of 60.2% (-2.8pct). The company continued to strengthen e-commerce, and the online share further increased to 37.3% (+4.1pct). Infants: Revenue of 975 million yuan (+11.1%) and gross profit margin of 60.7% (+0.2pct). Among them, high-end children's clothing “Aidova” performed well. In terms of expenses, the annual sales/management/finance/R&D expenses rates were 41.2%/8.1%/1.9%/1.7%, respectively, and -1.1 pct/-0.4 pct/-0.9 pct/-0.6 pct, respectively, over the previous year, showing results in cost reduction and efficiency.
Firmly promote the construction of a “pan-fashion industry interconnection ecosystem”, and “endogenous+extension” drive the medical and aesthetic landscape to expand women's clothing & babies: with the further improvement of the omni-channel sales network, the women's clothing sector is expected to continue to grow steadily; the baby sector continues to make efforts to optimize operational efficiency, and an increase in domestic and foreign market share can be expected. Medical aesthetics: On the epitaxial side, the company completed the acquisition of Zhengzhou Jimei Holdings in March 2024 to further expand its business scale; on the endogenous side, the company will return to the underlying medical logic to achieve the true value of medical and aesthetic services. We believe that the company has formed a prototype of a national medical and aesthetic chain (39 companies distributed in 10 cities as of March 2024) and is expected to achieve long-term growth.
Risk warning: Store expansion falls short of expectations, loss of human resources, increased competition, medical accidents, weak consumption.