Core views:
The company announced its 2023 financial results. According to financial reports, in 2023, the company achieved revenue of 5.145 billion yuan, +24.41% year-on-year, net profit of 225 million yuan, +953.37% year-on-year, net profit of 196 million yuan after year; gross profit margin of 57.44%, -0.07 pct year on year, net profit margin 4.90%, +4.01 pct year on year, and profitability gradually recovered. In 2023, the company's sales/management/R&D/finance expense ratio was 41.16%/8.11%/1.86%/1.66%, -1.25/-0.43/-1.14/ -0.68pct year-on-year, with good cost control.
The women's clothing and medical and aesthetic businesses are growing rapidly, while the baby business is relatively steady. (1) The women's clothing business achieved revenue of 1,984 billion yuan in 2023, with a gross profit margin of 60.17%, year-on-year, and -2.76pct. Mainly e-commerce channels with low gross margins grew the fastest; at the end of the period, there were 599 stores, 13 year-on-year, of which 438/107/54 were own/distribution/online, respectively. (2) The medical and aesthetic business achieved revenue of 2.127 billion yuan in 2023, +27.75%, gross profit margin of 53.15%, and +3.27pct; at the end of the period, 38 stores, including Milan Baiyu/Crystal Skin Medical/Han Chen Medical Aesthetic/Gao Shengsheng/Wuhan Wuzhou were 4/30/2/1/1 respectively, with revenue of +29.25%/30.85%/24.77%/27.63%/20.59%. (3) The infant business achieved revenue of 975 million yuan in 2023, +11.13% year over year, gross profit margin of 60.66%, and +0.15 pct year over year.
The scale of the medical and aesthetic business continues to expand, and competitiveness is continuously enhanced. The company's major medical and aesthetic brands focus on different medical and aesthetic fields, and have high brand awareness and market share. According to financial reports, by the end of the period, the company had set up 7 medical and aesthetic mergers and acquisitions funds, with a fund size of 2,837 billion yuan. Earlier, it passed the fund's specialized acquisition and incubation of medical and aesthetic standards; the company accelerated the expansion of the medical and aesthetic business under the dual drive of epitaxial and endogenous generation, which is conducive to enhancing the scale and competitiveness of the medical and aesthetic business.
Profit forecast and investment advice: EPS is expected to be 0.74 yuan/share, 0.87 yuan/share, and 1.00 yuan/share in 2024-2026, respectively. Using the segmented valuation method, the reasonable value of the company is 27.58 yuan/share, corresponding to 37 XPE in 24 years. Maintain a “buy” rating.
Risk warning. The risk of intense competition in clothing; the risk of falling medical and aesthetic valuations; business model risk.