Incidents:
The company released its 2023 annual report and 2024/1 quarterly report: 2023 revenue of 1,934 million yuan (YoY +9.3%), net profit of 749 million yuan (YoY -11.6%), net profit of 728 million yuan (YoY -5.1%); 2024Q1 revenue of 409 million yuan (YoY +9.7%), net profit attributable to mother of 152 million yuan (-4.8% YoY), net profit not attributable to mother (-5.3% YoY).
Revenue growth is steady, and the share of online direct sales is increasing
The company's revenue growth is mainly driven by the continuous growth of online direct sales revenue. The decline in net profit is mainly due to an increase in related sales expenses driven by an increase in the share of online sales, increased depreciation and amortization of the company's North Beauty Valley base, and continued increase in R&D investment. In 2023, the comprehensive gross profit margin was 82.2% (-0.84pct year on year), sales rate 27.5% (year-on-year +5.48pct), management rate 4.67% (year-on-year +1.98pct), and net profit margin to mother 38.76% (y-9.13pct). 2024Q1 comprehensive gross profit margin 81.4% (YoY -1.23pct), sales rate 32.6% (YoY +9.26pct), management rate 5.36% (YoY -0.67pct), net profit margin 37.09% (YoY -5.62pct).
Stable machinery, strong cosmetics, channel breadth and depth go hand in hand
1) Product side: Shierjia Medical Sodium Hyaluronate Repair Patch has formed a leading market position. The company launched Class II medical collagen dressing in 2022 to build a two-wheel drive strategy of sodium hyaluronate and collagen. As skincare brand competition and skincare education deepens, consumers pay more attention to the ingredients, efficacy and safety of products, and the company has successively launched “whitening masks”, “acne removal masks”, “anti-wrinkle masks”, etc. 2) Channel side: The company uses online and offline channels to coordinate development, stabilize Tmall's existing advantages and expand new platforms to achieve breakthroughs; at the same time, the company actively expands the live streaming sales model to deliver customers to direct-run stores; in addition, the company's offline physical channel distribution model is rapidly developing, becoming a new growth point for offline revenue.
Profit Forecasts, Valuations, and Ratings
Considering the high online growth rate driven by the company's e-commerce transformation, there is a certain increase in sales rates. The company's revenue for 2024-2026 is 21.93/24.71/2,748 billion yuan respectively, corresponding growth rates are 13.4%/12.7%/11.2%, respectively; net profit to mother is 8.25/9.18/1,019 billion yuan, respectively, corresponding growth rates are 10.1%/11.3%/11.0%; EPS is 2.06/2.29/2.55 yuan/share, respectively. Based on comparable company valuations, the company was given 20 times PE in 2024, corresponding to a target price of RMB 41.23, maintaining the “gain” rating.
Risk warning: Market competition intensifies; new product promotion falls short of expectations; offline recovery falls short of expectations; traffic costs have risen sharply