Incidents:
The company released its 2023 annual report and 2024 quarterly report.
Comment:
24Q1 profit increased 164.53% year on year. The annual revenue growth target was 20% +the company achieved operating income of 1,067 billion yuan, an increase of 1.58% year on year, achieved net profit attributable to the parent company of 93 million yuan, a year-on-year decrease of 4.93%, and realized net profit without return to mother of 36 million yuan, a year-on-year decrease of 44.52%. In terms of profitability, the company's gross margin in '23 was 23.19%, down 0.78pct year on year, and net margin was 8.67%, down 0.59pct year on year. On the cost side, the total cost rate for the company period in '23 was 15.36%, a year-on-year decrease of 2.08pct. Among them, the sales expense ratio was 6.99%, down 2.99 pct year on year, mainly due to a decrease in private brand marketing promotion and channel investment; the management fee rate was 4.94%, up 1.03 pct year on year, mainly due to the increase in consulting service fees for Tibet Fuyang Venture Capital Management Co., Ltd.; the financial cost ratio was 0.7%, up 0.59 pct year on year, and the R&D cost rate was 2.74%, down 0.72 pct year on year. The 24Q1 company achieved operating income of 286 million yuan, an increase of 28.29% over the previous year, achieved net profit belonging to the parent company of 19 million yuan, an increase of 164.53% year on year, and net profit after deducting non-return to mother increased 253.1% year on year. In 2024, the company's target revenue will grow by more than 20%, and the profit margin of the main business will be around 7%.
The main dental care business is growing steadily, and customer expansion is progressing steadily
By business, the company's oral care product revenue in '23 was 722 million yuan, up 7.90% year on year, and gross profit margin was 23.73%, which was basically the same as year on year. Revenue from wet wipes products was 336 million yuan, down 9.88% year on year, gross profit margin was 21.27%, down 2.96 pct year on year. By business, the company's export revenue in '23 was 624 million yuan, down 5.13% year on year, and gross profit margin was 24.73%, down 0.45 pct year on year. Domestic sales revenue was 434 million yuan, up 12.96% year on year, gross profit margin 20.4%, down 1.27 pct year on year. The company has established good cooperative relationships with customers such as Chongqing Dengkang, Weimizi, Medline, and CARDINAL HEALTH. It has further implemented a major customer development strategy in 23 years, and successfully developed an international brand and two growing customers within the year, which is expected to generate effective revenue in 24H2.
Shanenkang's acquisition was implemented, increasing epitaxial expansion to create the second epitaxial growth curve. In February '23, the company announced that it intended to acquire 16.50% of Vimice's shares and complete the transaction at the end of October. By the end of 2023, the company held 32.27% of Vimesi's shares, making it the single largest shareholder of Vimesi. Vimezi is a leading provider of oral care products in China. It achieved a net profit of 164 million yuan in 23, and is expected to achieve good collaboration with the company's oral care business; in November 23, the company announced that it plans to acquire 52% of Shennkang's shares for 213 million yuan, and the delivery will be completed in April '24. Shanenkang focuses on R&D, production and marketing of the entire probiotic industry chain. It is expected that the annual production capacity of bacterial powder will gradually reach 40 tons in 24, add more than 10 new industrialized strains, and achieve net profit of not less than 1200/18/30 million yuan in 2024/2025/2026, respectively, according to performance promises, which is expected to help the company build a second growth curve.
Investment advice and profit forecasting
The company is a leading manufacturer of oral care and wipes in China, with an endogenous epitaxial layout for oral health. Considering the impact of Shanenkang's merger, we expect the company's net profit to be 1.43/1.85/228 billion yuan for 24-26, EPS of 1.42/1.84/2.27 yuan, corresponding PE of 16/12/10x, maintaining the “gain” rating.
Risk warning
The risk of increased competition in the industry, and the risk that the project's commissioning schedule falls short of expectations.