Performance Overview: 23 was in line with expectations, and the 24Q1 investment loss was about 3.08 million yuan, putting pressure on apparent performance and completing the 23-year equity incentive target. Revenue of $4.49 billion in '23 (-5% YoY, same below), net profit attributable to mother of $294 million (+135%), deducted from non-return mother of $273 million (+181%).
24Q1 net profit without return to mother was +45% in line with expectations, and investment losses dragged down apparent net profit. Revenue of 1.03 billion yuan (-1%), net profit due to mother of 40 million yuan (-23%), deducted from non-return mother of 53 million yuan (+45%). The company previously predicted net profit of 2.8-320 million yuan for 23 years, which was actually close to the median, and achieved the 23-year equity incentive target (after amortization expenses). Furthermore, the company's non-revenue for 23Q1 was 15.28 million yuan, and the non-revenue loss for the same period this year was 13.31 million yuan. From a year-on-year perspective, the loss increased by about 28.59 million yuan.
Revenue split: Operating on behalf of Johnson & Johnson Department+ Imperial Clay Shop, Ifidan expects steady return over 23 years: revenue split by business = 78% water cream +18% mask +2% brand management services +1% others, respectively -0.2%/-9%/-60%/+80% compared to the previous period. Among them, the main brand, Unifang, is still in the adjustment period. Third-party e-commerce tracking data shows a decline. Furthermore, brand management services were affected by the spin-off of Johnson & Johnson's consumer health business into Kenvue (Kenvue) and independent listing. Currently, the two parties have completed a new round of contract renewals. In summary, the short-term adjustment of the main brand+proxy operation business has put pressure on the revenue side, but it is expected that the high-end brand Ifidan will maintain a high level of certainty.
Profitability: category structure optimization, gross margin increase
23 years: gross profit margin 58.4% (+5.3pp), net profit margin 6.7% (+4.1pp). Sales/management/R&D expense ratios were 41.3% (-1.7pp)/5.2% (+1.1pp)/1.7% (-0.2pp); 24Q1: gross profit margin 61.3% (+7.6pp), net profit margin 4.1% (-1.1pp), respectively. Sales/management/R&D expenses were 46.3% (+5.1pp)/5.7% (+1.5pp)/1.8% (-0.6pp), respectively.
Highlights: Ifidan's potential is rising, and other business improvements can be expected
Ifidan: Continue the high growth trend and build high-quality brand assets. According to tripartite data tracking, the 24Q1 Yifidan Tmall + Douyin GMV was +78%, and continued to increase the penetration of high-end people through activities such as brand art salons and South France traceability. Wu Lei, the spokesperson for sunscreen recently added to the Paris Olympics traffic catalysis+follow-up gold line promotion, and is optimistic that the trend of high growth and high profit will be maintained.
Other brands: Little Maze has a low base, high growth, and Imperial Clay Shop continues to be renovated. According to tripartite data tracking, the 24Q1 Tmall + Douyin GMV was +73% compared to the same period, and an improvement trend is already emerging; the number of live streaming partners in Yunifang in '23 exceeded 3000+, GMV for multiple live broadcasts exceeded 10 million, and the brand upgrade is underway.
Proxy operation: Johnson & Johnson stabilized, and other brands continued to gain strength. A new cooperation was reached with Kenvue in September '23. The impact of previous business adjustments was gradually eliminated. In addition, new brands such as KIKO and Mystic will also contribute significantly.
Profit Forecast and Valuation:
The company's own brands continue to be upgraded, and agent brands have also entered a healthy track, and their performance is multi-wheel drive. Net profit due to mother in 2024-2026 is estimated to be 3.9/49/61 billion yuan respectively, +34%/26%/23% year-on-year, corresponding PE is 17/14/11X. Currently, it is still in a valuation depression in the beauty sector and maintains a “buy” rating.
Risk warning: Industry sentiment is declining; consumption is weak; new brands fall short of expectations; new products fall short of expectations.