Incident Overview
The company released its 2023 report and 2024 quarterly report. In 2023, the company achieved revenue of 5,522 billion yuan, +10.14% year on year; net profit to mother of 757 million yuan, -28.02% year on year; net profit after deducting non-return to mother of 618 million yuan, or -35.20% year on year. In 2024Q1, the company achieved revenue of 1,097 billion yuan, +27.06% year over year; net profit to mother was 177 million yuan, +11.74% year over year; net profit after deducting non-return to mother was 154 million yuan, +21.94% year over year.
Analysis and judgment
The main brand Winona launched a new product in the “White Repair Bottle” series, and the advanced “Sensitive Plus” continues to expand its circle. Based on the “four-in-one whitening and blemish lightening mechanism”, the “Winona” brand released the dermatology-grade blemish lightening product “Winona Whitening Bottle” during the 25th World Congress of Dermatology. The brand seized the opportunity of the “sensitive skin whitening” circuit to rise to the top 1 brand list in the beauty and skincare category several times.
The Winona brand continues to expand its matrix from large single products to multi-star products, achieving advanced levels of sensitive skin repair to “sensitive skin plus”, further broadening the boundaries of sensitive efficacy care.
Independent incubation+investment and mergers and acquisitions to continuously expand the skin health ecosystem. (1) Winona Baby: A dermatology-grade skincare brand specializing in infant skin health. The company continues to enrich the “Winona Baby (Winona Baby)” brand product line to meet the various needs of infants and toddlers such as bathing, moisturizing, and sunscreen. (2) Aikecheng: The first high-end professional anti-aging technology brand of domestic products incubated within the company. Through strategic cooperation with medical and aesthetic institutions as professional endorsement, it reaches Dana New in a wide range of online channels, and invests in high-end displays and value services in leading domestic department stores to continue to build a medical-grade full-process anti-aging brand with hard core benefits, professional quality and high-end image. (3) Befortin: Relying on plant technology and industry-university-research medicine, using the advantages of natural plant resources in Yunnan, extracting core functional ingredients from Yunnan's characteristic plateau plants and using them in “Beforteen (Beforteen)” products, and combining artificial intelligence technology with acne diagnosis and treatment, the model and concept of “hierarchical customization, precise anti-acne” was proposed in depth. (4) The company successfully acquired Yuejiang Investment and obtained the two brands Ji Rui (Za) and “Bomei PURE & MILD, which completed the company's public line of skincare and makeup.
Online platform Alibaba sales are under pressure, and offline OTC channels are growing rapidly. By channel, the company's online revenue in 2023 was 3.552 billion yuan, -0.37% year-on-year. Among them, Ali had revenue of 1,762 billion yuan, -14.46%; Douyin had revenue of 631 million yuan, +47.14%; Vipshop had revenue of 307 million yuan, +1.61% year over year; and JD had revenue of 374 million yuan, +5% year over year. Offline channel revenue was 1,427 billion yuan, +48.87% year-on-year, accounting for 25.93% of main revenue, or +6.75pcts year-on-year. Among them, the OTC distribution channel sales model achieved revenue of 816 million yuan, +66.08% over the same period last year.
Profitability is under pressure in the short term. In 2023, the company achieved a gross sales margin of 73.90%, -1.31 pcts year on year; achieved a net profit margin of 13.71% to mother, -7.26 pcts year on year. On the cost side, the sales expense ratio was 47.26%, +6.42pcts; the management expense ratio was 7.48%, +0.64pcts year over year; and the R&D expense ratio was 5.41%, +0.33pcts year over year. Mainly due to (1) a slight decrease in gross margin due to (1) the company's product formulation, production process and outer packaging upgrades; (2) the new central factory base project was completed and put into operation, and the company's long-term asset depreciation and amortization costs and expenses increased; (3) sales of online promotions such as “Double 11" in the beauty industry in 2023 were generally lower than expected, the company did not achieve the expected sales target of “Double 11", and the average customer acquisition cost of the company's main online stores increased.
Investment advice
We expect the company's revenue in 2023-2025 to be 71.04, 88.40/10.650 billion yuan, respectively, +28.65%, +24.43%, and +20.48% year-on-year; net profit to mother will be 12.08, 15.51, and 1.917 billion yuan, respectively, +59.60%, +28.39%, and +23.64% year-on-year respectively. The corresponding EPS is 2.85, 3.66, and 4.53 yuan, respectively. The corresponding PE is 20, 16, and 13 times, respectively, maintaining the “buy” rating.
Risk warning
Risk of declining industry sentiment; risk of increased competition; risk of product quality accidents; risk of new product promotion falling short of expectations; risk of consumption recovery falling short of expectations; changes in channel traffic, etc.