An overview of the incident. The company released its 2023 annual report and 2024 quarterly report on April 26. In 2023, we achieved operating income of 1,934 billion yuan, +9.29% year over year; realized net profit of 749 million yuan, -11.56% year over year; realized net profit without deduction of 728 million yuan, -5.06% year on year. In 24Q1, we achieved operating income of 409 million yuan, +9.65% year on year; realized net profit of 152 million yuan, -4.77% year on year; realized net profit without deduction to mother of 142 million yuan, -5.34% year on year.
24Q1 revenue continued to grow, mainly driven by growth in cosmetics and online channels. In 2023, the company achieved revenue of 1.934 billion yuan, +9.29% year-on-year. 1) By product, the cosmetics category achieved revenue of 1,083 million yuan, or +19.92%, accounting for 56.02% of revenue, +4.97 pct year on year; the medical device category achieved revenue of 850 million yuan, -1.79% year-on-year, accounting for 43.98% of revenue.
2) By channel, in 2023, online channels achieved revenue of 924 million yuan, +28.53% year-on-year, accounting for 47.76% of revenue, or +7.15 pcts year-on-year. Among them, direct sales achieved revenue of 790 million yuan, +33.94% year over year; sales revenue of 133 million yuan, or +3.66% year over year; offline distribution channels achieved revenue of 1,010 billion yuan, -3.87% year over year, accounting for 52.23% of revenue.
The gross margin decreased year over year, and the expense ratio increased. ① On the gross margin side, in 2023, gross margin was 82.23%, -0.84 pct year-on-year, mainly due to changes in product structure and channel structure. The gross margin of cosmetics and medical devices was 80.26% and 84.74%, +0.05 and -1.32 pct year-on-year. In 24Q1, gross margin was 81.41%, -1.24 pct year over year. ② On the rate side, in 2023, sales rate/management rate/R&D rate/finance rate were 27.53%/4.67%/1.70%/-3.88%, respectively, +5.47/+1.98/+0.83/-2.35pct, respectively. Among them, in 2023, sales expenses were +36.44% year-on-year, mainly due to an increase in marketing expenses related to online revenue; management expenses were +89.74% year-on-year, mainly due to increased depreciation of housing and equipment, property expenses, purchase of low-value consumables such as office furniture and kitchen equipment, new recruitments, etc.; financial expenses were -75 billion yuan, mainly due to the increase in interest income due to increased monetary capital growth; R&D expenses were +112.88%, mainly due to the company's continuous increase in R&D investment. In 24Q1, the sales rate/management rate/R&D rate/finance rate was 32.62%/5.36%/1.48%/-6.23%, compared with +9.26/ -0.66/+0.03/-3.47 pct, respectively. The increase in sales rates was mainly due to 24Q1's continuous increase in promotion expenses and e-commerce channel expenses. ③ Net interest rate: Based on gross margin and rate conditions, in 2023, the net interest rate was 38.76%, -9.13 pct; in 24Q1, the net interest rate was 37.09%, -5.62 pct year on year, mainly due to the increase in the share of online sales driving the increase in sales expenses and the opening of the company's Northern Beauty Valley base and continuous increase in R&D investment.
The multiple dimensions of products, channels, and marketing strengthen competitiveness, deepen brand awareness and forge leading positions in enterprises. ① Large single products build brand power, and the product matrix continues to be rich. Shierjia's core products are white film and black film. The two major products are driving the continuous improvement of the medical device business market position. Based on medical dressing products, the company rapidly expanded functional skincare products, covering various dosage forms such as water, essence, lotion, spray, and freeze-dried powder to create products with various effects such as moisturizing, soothing, repairing, acne removal, whitening, firming, and anti-wrinkle. In 2023, Shierjia had 5 single products with sales of over 100 million, namely medical sodium hyaluronate repair patch (white film), medical sodium hyaluronate repair patch (black film), Shierjia Centella soothing repair patch, and Shierjia niacinamide whitening and blemish repair mask. Currently, various raw materials and products are in the R&D stage. In terms of medical and aesthetic product layout, 2 collagen fillers and 2 microsphere fillers are currently being developed. Among them, recombinant type III humanized collagen lyophilized fiber is in the product pilot production stage, and recombinant type III humanized collagen fillers are in the product design input and small trial stage; the key preparation base of bacterial cellulose-based tissue engineering scaffolds and the development of L-lactic acid-based tissue engineering scaffolds are all in the research stage. It is expected that the future will enrich the company's medical and aesthetic product pipeline. ② In-depth offline layout, online multi-platform access. We attach great importance to the offline layout, and have achieved a multi-level and multi-dimensional terminal sales pattern covering medical institutions, beauty institutions, cosmetics franchise stores, etc.; online has been implemented into consumer scenarios through diverse methods such as direct sales and distribution. B2C platforms such as Tmall, Xiaohongshu, Koala Shopping, JD, Douyin, Kuaishou, and Pinduoduo have all set up official self-operated flagship stores to achieve full coverage of online sales platforms. ③ Multi-dimensional accurate marketing layout to maintain strong brand power. Multi-level promotion from traditional media, new media, mobile devices, public accounts to mini-programs, etc., enables brand promotion from breadth to accuracy, and accurate marketing efficiently enhances brand awareness.
Release the 2023 profit distribution plan. The company plans to distribute cash dividends of 10 yuan (tax included) to shareholders for every 10 shares, for a total cash dividend of 400 million yuan (tax included), with a cash dividend ratio of 53.39%.
Investment advice: In the functional skincare products and medical device dressings circuit, Shierjia's brand strength has been verified by the market, and its R&D capacity is expected to continue to increase. The company is expected to achieve operating income of 21.76, 24.41, and 2,720 billion yuan in 24-26, +12.2%, and +11.4%, respectively; achieving net profit of 8.50, 9.53, and 1,066 billion yuan, respectively, +13.5%, +12.1%, and +11.8%, corresponding to the closing price on April 26, PE was 16 /14/12 times, maintaining the “Recommended” rating.
Risk warning: New product expansion falls short of expectations; industry competition intensifies; product safety risks; fund-raising projects are not progressing as expected, etc.