Event: The company released its 2023 & 2024 Q1 results report. 1) In 2023, we achieved revenue of 1.934 billion yuan, +9.3% year-on-year; realized net profit of 749 million yuan, -11.6% year-on-year, and realized deduction of non-net profit of 728 million yuan, or -5.1% year-on-year. 2) In Q1 2024, we achieved revenue of 409 million yuan, +9.7% year-on-year; realized net profit of 152 million yuan, -4.8% year-on-year, and realized deduction of non-net profit of 142 million yuan, or -5.3% year-on-year.
Performance analysis: Increased marketing investment and R & D expansion, under pressure on profitability. 2023 gross profit margin 82.23%, year-on-year -0.8pct, net profit margin 38.76%, year-on-year -9.1pct; 2024Q1 gross profit margin 81.41%, year-on-year -1.2pct, net profit margin 37.09%, year-on-year -5.6pct. In 2023, sales/management/R&D expenses were 27.53%/4.67%/1.70%, respectively, +5.5/+2.0/+0.8pct compared to the same period. The company's sales expenses increased, depreciation and amortization increased with the opening of the Beigu base, and continued increase in R&D investment, putting pressure on profitability in the short term.
Category expansion: Medical devices develop medical and aesthetic clinics, and cosmetics continue to enrich categories. By product, medical devices/cosmetics category had revenue of RMB8.50/1,083 million yuan respectively, -1.8%/+19.9% year-on-year. In 2023, the company's five single products had annual sales of over 100 million yuan, namely white mask, black mask, acne cleansing and repair paste, Centella asiatica soothing repair patch, and niacinamide whitening and blemish repair mask. The company adheres to the two-wheel drive of sodium hyaluronate and collagen, continues to cultivate Class II and Class III medical devices, and expand the product line to explore the medical and aesthetic market. A variety of Class III device products are already in the R&D and investment stage, including the first sterile dressing, the first superficial injection filling product, and the first dermal layer injection filling product.
Channel construction: Online direct sales revenue continues to grow, and online and offline channels are broadened. By channel, online/offline revenue was 9.23/1,010 million yuan, +28.5%/-3.9% year-on-year. Among them, online direct sales/online consignment sales achieved revenue of 790/133 million yuan respectively, +33.9%/+3.9% year-on-year. The company continues to expand online and offline channels, stabilize Tmall's existing advantages, expand new platforms to achieve breakthroughs, and actively expand the live streaming sales model. The top five online self-operated stores account for about 83% of online channel sales revenue; the rapid development of the offline physical channel distribution model has gradually formed a diversified terminal sales matrix covering medical institutions, beauty institutions, retail pharmacy chains, etc., and has become a new growth point for offline revenue.
Investment suggestion: The company's multi-dimensional efforts in products, channels, and marketing are expected to achieve rapid development based on its leading position in the patch specialty skin care market. We expect the company's 2024-2026 revenue to be 22.03/24.97/2,814 billion yuan, and net profit to mother of 842/9.48/1,066 million yuan, corresponding PE is 16/14/13 times, respectively, to maintain the “increase” rating.
Risk warning: Risk of declining industry sentiment; increased risk of market competition; new product promotion falling short of expectations; risk of changes in cosmetics policies.