Event Overview: In 2023, the company achieved operating income of 5.522 billion yuan, +10.14% year on year; realized net profit of 757 million yuan, -28.02% year on year; realized net profit of 618 million yuan without return to mother, or -35.20% year on year. 24Q1 achieved operating income of 1,097 million yuan, +27.06% year over year; realized net profit of 175 million yuan, +11.74% year over year; realized net profit without return to mother of 154 million yuan, +21.94% year over year. Net profit after deducted net profit grew faster than net profit due mainly to 23 Q1's net profit of 31.45 million yuan, and 24Q1 was 12.44 million yuan.
Revenue in 2023 was +10.14% year over year, and offline channel revenue growth was steady. In 2023, the company's revenue achieved double-digit growth, but the main performance indicators fluctuated, mainly due to sales in the beauty industry's “Double 11" and other online promotions generally falling short of expectations. The company did not achieve the expected sales target of “Double 11". The company's product formula, production process and outer packaging upgrades led to a slight decrease in gross margin, the completion and commissioning of the new central factory base project, and an increase in the company's long-term asset depreciation and amortization costs and expenses, as well as an increase in the company's online costs for its main self-operated stores. By product: In 2023, skincare products achieved revenue of 4.870 billion yuan, +6.86% year over year; medical devices achieved operating revenue of 463 million yuan, +19.53% year over year; cosmetics achieved revenue of 169 million yuan, +217.28% year over year; services and other revenue reached 121 million yuan, +27.49% year over year. By channel: In 2023, online channel product sales achieved revenue of 3,552 billion yuan, -0.37%; OMO channel product sales achieved revenue of 523 million yuan, +10.30% year over year; offline channel product sales achieved revenue of 1,427 billion yuan, +48.87% year over year; offline channel services and others achieved revenue of 121 million yuan, +27.49% year over year. 24Q1 achieved revenue of 1,097 million yuan, +27.06% year-on-year, mainly due to increased product and brand awareness, which led to revenue growth. The revenue of the “Ji Rui” and “Pomei” brands successfully acquired by the company was combined. According to the brand scope for the same period in '23, revenue was about 959 million yuan, +11.13% over the same period last year.
Gross margin declined slightly, and the cost structure was more stable. ① Gross margin side: In 2023, gross margin was 73.90%, -1.31pct year on year. The gross margin decreased slightly due to upgrades in the company's product formulation, production process and outer packaging. In 24Q1, gross margin was 72.09%, -4.02 pct year over year, mainly due to the dynamic response of the company's promotion policies and product sales structure according to market demand. ② Rate side: In 2023, the sales rate, management rate, R&D rate, and finance rate were 47.26%, 7.48%, 5.41%, and -0.39%, respectively, compared with +6.42, +0.64, +0.33, and -0.10 pct, respectively. Among them, the increase in sales rates was mainly due to companies increasing brand promotion and e-commerce channel investment. At the same time, “Double 11" online promotion sales were not ideal, causing sales expenses to increase higher than revenue growth; 24Q1, sales rates, management rates, R&D rates, and financial rates were 4.6. 73%, 6.90%, 2.98%, and -0.42%, compared to -0.87, -0.82, -0.95, and +0.37pct, respectively. They are mainly due to the company's measures to effectively reduce administrative functions and back-office management expenses. ③ Net margin side: Based on gross margin and rate conditions, the net interest rate for 2023 was 13.75%, -7.20 pct year on year; 24Q1, net margin was 15.72%, -2.24 pct year on year.
Focus on the development of sensitive skin products and drive growth with multi-product strategies. ① Winona: Adhere to “Shu Min” as the base and continue to expand the “Sensitive Plus” product strategy. In “Double 11" in 2023, the Winona brand successfully advanced to the Tmall beauty and skincare TOP5. The core products remained strong, and the “cream lotion+sunscreen” performance was stable. It launched a series of products such as “Winona Whitening Bottle” and “Winona Light-Sensitive Freeze-dried Mask”, which performed well on the Douyin channel; ② Winona Baby: Deeply cultivate the effective skincare circuit for infants and children; ③ AOXMED: Focus on high-end anti-aging needs and create anti-aging needs An omni-channel product matrix for everything from medical and aesthetic to home beauty needs. ④ Beforteen: Positioning the advanced concept of “hierarchical customization and accurate acne treatment”. Through the innovative integration of AI technology and acne treatment, it realizes hierarchical customized acne diagnosis and treatment plans for thousands of people. ⑤ Popular skincare products and makeup: In 2023, the company successfully acquired Yuejiang Investment and obtained the “Ji Rui” and “Bomei” brands, which completed the company's popular skincare and makeup layout.
Release the 2023 equity distribution plan and the 2024 draft employee stock ownership plan. The 2023 profit distribution plan is to distribute cash dividends of 6.00 yuan (tax included) to all shareholders, with a total cash dividend of 252 million yuan (tax included), with a cash dividend ratio of 33.3%; since the company's 2023 restricted stock incentive plan did not meet the performance assessment targets for the first time to grant restricted shares, it was agreed to abolish 249 restricted shares that were granted for the first time but were not attributable during the first vesting period; the draft 2024 employee stock ownership plan was also released.
Investment advice: The company is actively building a multi-brand matrix and deepening the channel layout. The company is expected to achieve operating revenue of 71.05, 88.16, and 10.865 billion yuan in 2024 to 2026, +28.7%, +24.1%, and +23.2%, respectively; net profit to mother is 11.20, 14.15 and 1,765 billion yuan, respectively, +48.0%, +26.4% and +24.7%. The closing price on April 26 corresponds to PE 21/17/13 times, maintaining the “recommended” rating.
Risk warning: Channel expansion falls short of expectations; new product launch falls short of expectations; terminal demand falls short of expectations, etc.