Key points of investment
The 23-year results are in line with the median performance forecast. 23Q4-24Q1 net interest rates are above 30%, and profits are stable.
Year 23: Operating revenue/net profit attributable to mothers/net profit deducted from non-net profit of 24.00/7.34/715 million (+36%/89%, same as in parentheses, same below)
23Q4: Revenue/net profit to mothers/net profit deducted of $6.26/1.97/189 million (+21%/47%/43%) 24Q1: Revenue/net profit to mother/ net profit of 7.12/2.20/204 million yuan (+21%/30%) The previous results forecast net profit to mother of $72-760 million for 23 years, net profit of $703-743 million. The actual figures were $734 million and $715 million, respectively, in line with the median performance forecast.
Revenue split in 23 years: Both at home and abroad maintained a high growth rate, and the sunscreen business maintained a high growth rate by region: domestic/overseas: 2.16 billion, +23%/38%, accounting for 10%/90%. By product: active cosmetic ingredients and their raw materials/synthetic fragrances, 20.7/310 million, +44%/7% YoY, accounting for 86%/13%
Profitability: The effect of scale is prominent. The gross margin from the commissioning of the new plant fluctuates, and the net profit margin is stable at a high level of 30% +
23 years: gross profit margin of 48.8% (+12.2pp), net profit margin of 30.6% (+8.6pp), sales/management/R&D expenses ratio of 1.4% (+0.4pp)/6.8% (+0.8pp)/4.7% (+0.2pp), respectively.
23Q4: Gross profit margin of 46.6% (+1.7pp), net profit margin 31.6% (+5.6pp), sales/management/R&D expenses ratio of 1.3% (+0.3pp)/5% (-1.0pp)/4.9% (-0.3pp), respectively.
24Q1: Gross profit margin of 47.8% (-1.2pp), net profit margin 30.8% (+3.6pp), sales/management/R&D expenses ratio of 1.7% (-0.3pp)/6.9% (-0.4pp)/4.5% (-0.8pp), respectively.
The month-on-month decline in gross margin since 23Q4 is mainly due to the fact that some production lines at the Anqing factory have been put into operation, construction projects under construction have been upgraded, and amortization has increased. However, benefiting from the scale effect, the company's net interest rate remained stable at 30% +.
Outlook: The price system is expected to be maintained, product structure optimization+production capacity release, moving towards a personal care raw material platform, and the demand for sunscreen is expected to remain high. Looking at the Q2 price system, it is expected that the Q2 price system will remain high from the supply side. On the one hand, the tight supply pattern of the industry continues and demand is high. The peak summer season is approaching. We expect the overall price system of Q2 to remain stable. On the other hand, the company has continued to expand production in recent years. In November 23, it was officially announced that it will invest in the construction of the “Malaysian 10,000 tons/year production of sunscreen products”. The total investment of the project is 710,000 yuan, mainly to expand P-S and AVB production capacity. It is expected to be officially launched on the market in the second half of 2025, which is expected to further increase its market share.
Optimize the product structure and move towards a personal care ingredients platform. The proportion of the company's new sunscreen and personal care products is increasing, gradually moving from a single traditional chemical sunscreen to a raw material platform enterprise. While driving profitability optimization, the valuation is expected to improve. 1) Sunscreen: The production capacity scale of traditional sunscreen AVB, and new sunscreen P-A and EHT has been further increased. P-S has expanded production several times and is expected to expand further in 24 years. 2) New personal care products: The first batch of 12,800 tons/year amino acid surfactant and 3,000 tons/year of PO, a novel anti-dandruff agent, were completed and put into production. The high-end personal care products project with an annual output of 2,600 tons has basically been completed. It is expected to be significantly released in 24 years.
Profit forecasting and valuation
As a leader in traditional sunscreens, the company has accelerated the layout and production capacity expansion of new sunscreen and personal care products in recent years, and has benefited from the optimization of the competitive landscape, and is optimistic that it will move towards a personal care ingredients platform. We expect the company's 24-26 revenue to be 33.4/42.4/5.03 billion yuan, an increase of 39%/27%/18%; net profit to mother of 9.4/11.5/1.36 billion yuan, an increase of 28%/22%/19%. The current market capitalization corresponds to PE 14/12/10 times, respectively. Maintain a “buy” rating.
Risk warning
Risks include fluctuations in raw material and shipping prices, production capacity releases falling short of expectations, and changes in the global competitive landscape.