Core views:
Incident: The company released a quarterly report. 24Q1 achieved revenue of 890 million yuan, or -30.0%; net profit to mother of 60 million yuan, or -54.4% year-on-year; net profit after deducting non-return to mother of 50 million yuan, +242.5% (last year's Q1 non-recurring profit and loss of 110 million yuan, mainly investment income confirmed by the first batch of 6 target companies in major asset sales transactions).
By business, (1) Cosmetics business revenue was 540 million yuan, +15.1% year-on-year, accounting for about 61.1% of total revenue. Among them, Dr. Aier was 290 million yuan, +20.6% year over year, and Yilian 200 million yuan, +17.5% year over year. The gross profit margin of the cosmetics business is 62.2%, -0.7pp, and is basically stable. The company continues to optimize resource allocation, control marketing investment, increase the input-output ratio, and ensure the revenue growth rate of the two major brands and the overall profit increase in the cosmetics sector. The Yilian brand increased the live broadcast channel layout, with no interruptions during the Spring Festival, with 38 events in advance, Dabao+Self-broadcast dual-wheel drive; Dr. Aier cooperated with Tmall Little Black Box IP to upgrade the flash refill, create a “skincare coach” live broadcast room, deeply bind the Dabo channel to core producers, and continuously increase the sales share of high-margin products such as wake-up essence and flash charging products. (2) Pharmaceutical business revenue of 110 million yuan, -23.3% year over year, accounting for about 12.2%, gross margin -1.5pp to 54.9% year over year. (3) Raw materials business revenue of 80 million yuan, +10.3% year over year, accounting for about 9.4%, gross margin -0.7pp to 29.74% year over year, which is basically stable. Focus Freda actively adjusts sales strategies, adjusts sales product structure, increases sales share of cosmetic grade hyaluronic acid sales with high gross margin, actively develops the API business overseas markets, and increases sales of oral products through platforms such as Douyin and Kuaishou.
Profit forecast and investment suggestions: The company adheres to the “1234” high-quality innovation and development strategy, comprehensively invigorates health, and develops the three major businesses of cosmetics, pharmaceuticals and raw materials together. The “5+N” brand matrix layout in the cosmetics sector continues to advance, and there is plenty of room for future development. The company is expected to achieve net profit of 3.8, 4.6, and 550 million yuan in 24-26, maintaining the view that the company has a reasonable value of 11.19 yuan/share unchanged, corresponding to 30 times PE in 24, maintaining a “buy” rating.
Risk warning: The cosmetics industry is declining; e-commerce growth is slowing down; the expansion of new products falls short of expectations.