Introduction to this report:

Profitability remains high, and it is expected that it will be realized one after another in the research pipeline. It is optimistic about long-term growth space and maintains an increase in holdings rating.

Key points of investment:

Maintain an increase in holdings rating. The company's 2024Q1 revenue was 808 million yuan (+28.24%), net profit due to mother was 527 million yuan (+27.38%), and net profit after deducting non-return to mother was 528 million yuan (+36.53%). The results were in line with expectations. Maintain the 2024-2026 EPS forecast of 11.31/14.92/19.03 yuan, maintain the target price of 429.30 yuan, and maintain the increase in holdings rating.

Profitability remains high. Thanks to the continued release of high-margin varieties, the 2024Q1 gross profit margin was 94.55%, an increase of 0.1 pct over the previous month. The 2024Q1 sales expense ratio is 8.34% (-2.07pct), and the large-scale effect continues to be reflected; the management expense ratio is 4.07% (-3.92pct), mainly due to the same period in 2023, including Hong Kong stock listing expenses; the R&D expense ratio is 7.13% (+0.21pct), and R&D investment continues to increase. Net profit from changes in fair value affected net profit of 9.71 million yuan (revenue share -1.2%), net income of 22.19 million yuan (revenue share +3.5%) for the same period in 2023. Net profit margin was 65.35%, down 0.19 pct year on year, up 2.52 pct from month to month, and profitability remained high.

The full matrix layout of the pipeline under development is expected to be implemented one after another. In November 2023, the company signed a distribution agreement with South Korea's Jeisys to exclusively act as domestic agents for two of its non-invasive anti-aging instruments, Density and LinearZ, to achieve a breakthrough in energy source equipment pipelines. In the research pipeline, injecting botulinum toxin type A and medical polyvinyl alcohol-containing gel microspheres modified sodium hyaluronate gel (increasing the indications for chin filling) is already in the registration and application stage; lidocaine butacaine cream, second-generation implantation lines, medical sodium hyaluronate - hydroxypropyl methylcellulose gel, and liraglutide and simeglutide injections are in the clinical and pre-clinical stages. The research pipeline is rich to ensure long-term growth.

Catalyst: Terminal sales of recycled products exceeded expectations; reserve project research and development progress accelerated? Risk warning: risk of new product development and registration; risk of accidents in the medical beauty industry