Revenue and net profit attributable to mother in '23 were +10%, -28% YoY, 24Q1 +27%, +12%. Bettany published the 2023 Annual Report and the 2024 Quarterly Report. In 2023, the company achieved operating income of 5,522 billion yuan, a year-on-year increase of 10.14%, net profit of 757 million yuan, a year-on-year decrease of 28.01%, after deducting non-net profit of 618 million yuan, a year-on-year decrease of 35.02%, EPS of 1.79 yuan, and plans to distribute a cash dividend of 0.60 yuan (tax included) per share.
The company's revenue increased and profit declined in '23, mainly due to a decrease in gross margin of 1.31 PCT and an increase in expenses ratio of 7.29 PCT. The net profit margin decreased by 7.26 PCT to 13.70% year on year. On a quarterly basis, 23Q1-Q4 companies' revenue in a single quarter was +6.78%, +21.21%, +25.77%, and -1.31%, respectively, and net profit to mother was +8.41%, +17.14%, +5.66%, and -66.74%, respectively. Among them, the decline in 23Q4 performance was mainly due to “Double 11" not meeting sales targets.
In terms of the first quarterly report, 24Q1 achieved revenue of 1,097 billion yuan, a year-on-year increase of 27.06%, net profit to mother of 177 million yuan, an increase of 11.74% year-on-year, and a year-on-year net interest rate of 2.21PCT to 16.12%. Excluding the impact of the merger of Ji Rui and Bo Mei, the company's 24Q1 revenue increased by about 11.13% year over year.
Revenue from the skincare category increased 7% year on year. Looking at online/offline/OMO revenue of -0.4%/+49%/+10% by category, the share of revenue from skincare products, medical devices, and makeup in 23 (share of main business, same below) was 89%, 8%, and 3%, respectively. Revenue increased 6.86%, 19.53%, and 217.28% year-on-year respectively; the average sales price was 42.30 yuan (-1.58%), 98.83 yuan (+15.48%), and 29.72 yuan (-40.83%), respectively.
By channel, online, offline, and OMO channels (a new retail model combining online and offline) accounted for 65%, 26%, and 10% of revenue in '23, respectively. Revenue was -0.37%, +48.87%, and +10.30%, respectively.
1) Among online channels, the revenue share of self-operated, distribution+consignment sales models in '23 (share of main business, same below) was 49% and 15%, respectively, with revenue +0.65% and -3.54%, respectively. Looking at online channel platforms, self-built platforms and third-party platforms accounted for 1% and 63% of revenue in 23, respectively, with revenue of +59.48% and -1.05%, respectively.
Among third-party platforms, Alibaba, Douyin, Vipshop, and JD accounted for 32% of revenue in 2013 (-9PCT), 11% (+3PCT), 6% (-0.5PCT), and 7% (-0.3PCT), respectively. Revenue was -14.46%, +47.14%, +1.61%, and +5.00%, respectively. Alibaba's revenue declined, and Douyin performed well. Among the main brand Winona's online self-operated stores, Tmall flagship store, Douyin Guanqi store, JD Guanqi store, Kuaishou Beauty flagship store, and Douyin flagship store accounted for 43%, 14%, 3%, and 2% of online revenue, respectively. The revenue of the first four stores was -17.59%, +28.64%, +5.22%, and +35.04%, respectively.
2) In offline channels, all 23 years have been classified as a distribution+consignment model. Among them, the revenue from offline OTC distribution channels accounted for 15% of the main business revenue in 23 years, and revenue increased 66.08% year on year. Skin care products and medical devices grew significantly in OTC channels, with revenue growth of 75.45% and 51.96%, respectively.
3) In the OMO channel, the online Winona counter service platform accounted for 9% of revenue, up 4.94% year on year; offline self-operated stores accounted for 1% of revenue, a significant year-on-year increase. The number of direct-run stores totaled 123 by the end of 23, a net increase of 59.74% year on year.
Gross margin declined, expenses increased, and net operating cash flow decreased gross profit margin in '23: The gross margin fell 1.31PCT to 73.90% year-on-year, mainly due to upgrades in the company's product formulation, production process and outer packaging. By channel, the gross margins of online and offline channels in '23 were 71.24% and 80.23%, respectively, year-on-year, -2.50 and -1.10PCT, respectively. On a quarterly basis, gross margins for the single quarter from 23Q1 to Q4 were -1.71, -1.34, +2.21, and -3.29PCT, respectively. 24Q1 gross margin fell 4.02PCT to 72.09% year on year. Excluding the combined effects of Ji Rui and Bo Mei, gross margin was 74.20%, down 1.91 PCT year on year.
Expense rate: The cost rate increased by 7.29PCT to 59.77% year-on-year over the 23-year period. Among them, sales, management, R&D, and finance expenses were 47.26% (+6.41PCT), 7.48% (+0.64PCT), 5.41% (+0.33PCT), and -0.39% (-0.10PCT), respectively. The year-on-year increase in sales expenses was mainly due to the increase in the company's marketing, promotion, and drainage expenses. “Double 11" online sales fell short of expectations, and the cost per customer acquisition for each platform's own stores increased; management The year-on-year increase in cost rates is mainly due to increased management costs and other administrative expenses as scale increases. In addition, the new base project for the company's central factory was completed and put into operation in '23, and long-term asset depreciation and amortization costs increased.
On a quarterly basis, the cost rate for the single quarter period from 23Q1 to 24Q1 was -0.53, +2.87, +1.33, +15.46, and -2.27PCT, respectively. The cost rate declined year-on-year during the 24Q1 period, and the cost control effect was evident.
Other financial indicators: 1) Inventory increased by 34.84% year on year to 904 million yuan at the end of March '24, down 8.17% from the beginning of the year. Inventory turnover days in 23 and 24Q1 were 197 days, 255 days, +32 days year on year, and -37 days, respectively. 2) Accounts receivable increased 107.99% year over year to 562 million yuan at the end of March '24, down 8.83% from the beginning of the year. The number of accounts receivable turnover days in 23 and 24Q1 was 27 days, 44 days, +9 days year on year, and +13 days, respectively. 3) Net operating cash flow was 610 million yuan in '23, a year-on-year decrease of 20.67%, and a year-on-year decrease of 19.85% in 24Q1.
The multi-brand matrix was further enriched. The main brand continued to be deepened and improved, and the new brand volume was gradually expanded in 23 years. With the Winona brand as the core, many brands such as Winona Baby, Aikesong, Beftin, Ji Rui, and Pomei developed together. The main brand Winona continues to expand sensitive skin PLUS products based on skin relief. In '23, the “Double 11" promotion, Winona ranked in Tmall's TOP5 beauty and skincare category. It is also the only domestic brand that has been on the Tmall “Double 11" beauty and skincare TOP10 list for 7 consecutive years. Its core products continued to perform well. The special cream was ranked in the “Double 11" skin-relief cream TOP1, and the sunscreen was ranked TOP1 in Tmall's annual sunscreen list. Sensitive Skin Plus launched whitening bottles and dermatological-grade blemish relief products. This product and Winona Light-Sensitive Freeze-dried Mask successfully appeared on Douyin.
Winona Baby continues to enrich its product line to meet the various needs of infants and young children such as bathing, skin care, and sun protection. In 23, it climbed two places in the Tmall baby skincare category ranking to the TOP5, and Tmall's “Double 11" sales ranking ranked in the TOP3 baby skincare category. It actively seizes offline market share. In '23, the number of offline stores and terminals covered more than 5,000, including 985 terminal hospitals and nearly 4,000 Watsons.
As a high-end professional anti-aging technology brand, Aikoman has created an omni-channel product matrix for everything from medical beauty to home beauty, around the patented ingredient Meiya Anti. It has strategic cooperation with medical and aesthetic institutions, and is promoted online and in leading department stores.
Beftin was newly launched in August '23. It extracts core active ingredients from highland plants characteristic of Yunnan, proposes models and concepts for hierarchical customization and accurate acne prevention, and uses AI technology to grade acne conditions.
Furthermore, in '23, the company successfully acquired Yuejiang Investment and acquired two brands, Ji Rui and Pomei, which completed the company's popular skincare and makeup market.
Looking forward to the development of multiple brands and the improvement of management quality, releasing employee stock ownership plans to increase employee motivation. In 24, the company's main brand, Winona will upgrade its brand and build potential, including announcing a new spokesperson, creating advanced plant technology components, creating the Sensitive Skin PLUS boutique series, grooming and streamlining the product line; new brands such as Winona Baby and Aikaman will continue to enrich the product categories and expand the scale. The company will carry out omni-channel price control, the main brand Winona will strive to reduce its dependence on big promotions, and continue to enrich offline channels to explore the sinking market and seize market share. At the same time, the company has set up overseas markets and established the Southeast Asia business headquarters in '23, and will promote the brand to go overseas by building a localized operation team in '24.
In addition, the company announced the 2024 employee stock ownership plan (draft), involving no more than 249 employees, including director and deputy general manager Zhang Mei, director Zhou Wei, deputy general manager, financial director and board secretary Wang Long, other core management personnel, and 246 core key employees or employees in key positions who have made outstanding contributions to the company's development. This plan assesses the performance of individual employees, which helps stimulate employee motivation and improve operational efficiency.
We expect the company to continue to use its first-mover advantage as a leader in sensitive skin segmentation, expand categories, and continue to develop multiple brands to drive the company's long-term growth in multiple dimensions, while gradually improving operating efficiency and profitability.
Considering the uncertainty of consumer demand trends, we lowered the company's profit forecast for 24-25 (net profit reduced by 35%/36% from the previous profit forecast, respectively) and added a profit forecast for 26 years, corresponding to EPS of 2.29, 2.70, and 3.17 yuan respectively, and PE for 24 and 25 was 24 times and 21 times respectively, maintaining the “buy” rating.
Risk warning: Consumption is weak, overall growth of online channels is slowing; industry competition is intensifying; expansion of new products, new brands, and new channels/platforms falls short of expectations; improper cost control, etc.