The company published its annual report for 23 and a quarterly report for '24. Revenue in '23 was 1,067 billion yuan, yoy +1.58%; net profit before return to mother was 93 million yuan, yoy -4.93%; net profit after deducting non-return to mother was 0.36 million yuan, yoy -44.52%. Revenue grew steadily in '23. The decline in net profit after deducting non-net profit was affected by asset impairment losses of RMB 50.32 million in long-term equity investment of Vimezi. 24Q1 revenue/net profit attributable to mothers/net profit deducted from non-net profit were 286/0.19/0.18 million yuan respectively, +28.3%/+164.5%/+253% year-on-year, and the performance growth rate was impressive.

By product: Dental care is growing steadily, and the wipes business is stabilizing. In '23, the revenue of oral care products was 722 million yuan, yoy +7.9%, of which toothbrush revenue was 463 million yuan, yoy +6.2%; other oral care products were 259 million yuan, yoy +11.1%. 24Q1 toothbrush revenue yoy +15.8%, other products yoy +40.4%, and the growth of dental products accelerated. In '23, wet wipe revenue was 336 million yuan, yoy -9.9%. Disinfecting wipes declined, and 24Q1 wet wipe revenue increased yoy +37.9%.

Gross margin rebounded markedly in 24Q1. The gross margin/net margin for '23 was 23.2%/8.7%, -0.8/-0.6pct yoy, of which the gross margin for wet wipes was -2.96pct yoy. In 23 years, the sales/management/R&D/finance expense ratio was 7.0%/4.9%/2.7%/0.7%, year-on-year, -3.0/+1.0/-0.7/+0.6pct, and private brand marketing investment decreased. 24Q1 gross margin was +3.7pct year-on-year to 25.4%, and gross margin recovered significantly.

Profit forecasting and investment advice. The company is deeply involved in the field of oral care and health, benefiting from the continuous expansion of the marketing organization system, adhering to the big customer strategy, and the steady development of the toothbrush and wipes business, while strengthening its own brand building. The epitaxial investment in Vimezie and Shennkang is expected to increase profits. It is expected that 24-26 net profit will be 1.2/1.6/20 billion yuan, an increase of 32.5%/29.7%/23.1% year-on-year.

Referring to comparable companies, considering the company's card position in the oral care and health industry, extending the industrial chain with endogenous epitaxial extension, and developing its own brand, the company had plenty of growth momentum. It gave a 24-year 24xPE valuation, corresponding to a reasonable value of 29.28 yuan/share, and maintained a “buy” rating.

Risk warning. Raw material prices fluctuate, new products fall short of expectations, demand falls short of expectations, industry competition intensifies, private brand building falls short of expectations, exchange rate fluctuations, investment risks, etc.