Core views
Under a high base, the company started well. In 24Q1, revenue increased by 28.2% and +15.6% month-on-month, while net profit to mother and net profit after deduction increased 27.4% and 36.5%, which is at the top of the performance forecast range. Among them: The core product Hi Body series has maintained steady growth. The growth rate of Bubble Needle/Hi Body 2.5 is better, and the new product Wet White Angel continues to be released. Looking ahead, 24Q2 is expected to grow steadily along with the recovery in medical and aesthetic demand. 24H2 growth is expected to accelerate due to the low Q3 base and the gradual release of the company's new products. Among them, Wet White Angel+ Like a Living Angel and Hi Body 2.5ml/Active Water Light Acupuncture are the main drivers of growth.
occurrences
The company released its 2024 quarterly report: 24Q1 revenue of 808 million yuan/ +28.2%, net profit of 527 million yuan/ +27.4%, net profit of 528 million yuan/ +36.5%; net cash flow from operating activities of 537 million yuan/ +25.7%, EPS (basic) of 2.45 yuan/share/ +28.3%, and ROE (weighted) of 7.97% /+1.12pct.
Brief review
Under a high base, 24Q1 started well, and net profit attributable to mother was at the top of the performance forecast range.
On the basis of the high base of 2023Q1 (strong recovery in medical and aesthetic consumption in February-March 23), 24Q1's revenue increased 28.2% year over year and +15.6% month over month, mainly due to the gradual recovery of medical and aesthetic terminal consumption, steady growth in solution injection products, and the release of recycled material products. Net profit from 24Q1 and net profit from non-return to mother increased by 27.4% (23% to 29% corresponding to the performance forecast) and 36.5% (33% to 39% corresponding to the performance forecast). Net profit after deducting the faster growth rate was mainly due to non-recurring profit and loss of -1.06 million yuan (27 million yuan in 23Q1), including loss of 9.71 million yuan in foreign investment.
On the product side, it is expected that solution injection products will grow steadily, and gel products such as Wet White Angel+ Live Angel will continue to be released. With the brand strength and market base of the “Hi Body” series products, the company expects steady revenue growth of 24Q1 solution products, accounting for nearly 60% of revenue, with the growth rate of compliant water light products being better; the 24Q1 “wet white+like life” twin regeneration combination is expected to continue to grow well, and the growth rate is expected to increase by 30% +. Among them, Wet White Angel accumulates and maintains a high growth rate with “Like a Living Angel” to gradually climb the market share of recycled materials.
Profitability remained high in 24Q1, and expense ratios were gradually optimized. The 24Q1 company's gross profit margin was 94.55% /-0.74pct, up 94.45% from 23Q4; 24Q1 net profit margin was 65.35% /-0.19pct, +2.52pct. The 24Q1 company's sales, management, and R&D expenses rates were 8.34%, 4.07%, and 7.13%, respectively, -2.07, -3.92, and +0.21pct, respectively. The large decline in management expenses was mainly due to the fact that Hong Kong stock listing expenses were included in the same period last year. The 24Q1 net operating cash flow was 537 million yuan/ +25.73%, and the cash flow situation was good.
Medical and aesthetic products are being developed with abundant reserves, deepening the industrial layout in the fields of medicine, aesthetic skin care, fat loss and weight loss, and optoelectronics. The products currently being developed by the company include: modified sodium hyaluronate gel with medical polyvinyl alcohol gel microspheres to correct back chin contraction (registration stage), injectable type A botulinum toxin to improve lines between eyebrows (registration stage), second-generation facial implants for soft tissue lifting (clinical trial stage), lidocaine butacaine cream (clinical trial stage) for local anesthesia on the skin before superficial skin surgery in adults (clinical trial stage), and injectable hyaluronidase to dissolve hyaluronic acid (pre-clinical research stage). Furthermore, the company is deepening its industrial layout in the fields of medicine, aesthetic skin care, fat loss and weight loss, and optoelectronics.
Looking ahead to 2024, 24Q2 is expected to maintain steady growth and accelerate 24H2. Wet White Angel+ Like a Living Angel and Hi Body 2.5ml/Active Water Light Needles are expected to contribute the main increase. Demand for medicine and aesthetics has gradually recovered over the past 24 years. The company's 24Q2 is expected to grow steadily, and 24H2 is expected to accelerate, mainly due to the low Q3 base and the gradual release of the company's new products. Among them: 1) the core single product, Wet White Angel, can be developed collaboratively, and is expected to be gradually released; 2) the company's Hi Ti 2.5ml and Hydrotherapy Acupuncture products are expected to benefit from the market compliance process, and the market share is expected to continue to increase.
Profit forecast: Revenue is expected to be 38.6, 50.5, and 6.31 billion yuan for 2024-2026, up 34.4%, 30.9%, 24.9%; net profit to mother of 24.6, 32.1, 4.03 billion yuan, up 32.3%, 30.6%, and 25.5%. Corresponding PE is 31, 24, and 19 times, maintaining the “buy” rating.
Risk warning: 1) Strengthening medical and aesthetic supervision: The company's main products are Class III medical devices, which are licensed products. If the country's policy on medical device production and operation changes, it may have an impact on the company's business plan; 2) Product development and registration risks: The company's new product development, from laboratory research to final approval for marketing and sale, generally requires multiple steps such as laboratory research, animal experiments, registration tests, clinical trials, and registration declarations. There is some uncertainty, and the company faces product development and registration risks. 3) Risk of increased market competition: The company is a leading domestic provider of innovative medical and aesthetic products, and has a certain first-mover advantage in the domestic market. Demand in the medical beauty market has grown rapidly in recent years, and the development prospects of the company's industry are positive. The average gross margin level of the leading product industry is high, attracting many enterprises to enter the domestic market through independent research and development or mergers and acquisitions. Industry competition will gradually intensify, and the company's business performance will face the risk of increased market competition.