Revenue in '23 was -4.45% YoY, and net profit to mother was -38.97% YoY. The company achieved operating income of 6.076 billion yuan in 2023, -4.45% year on year; net profit to mother of 593 million yuan, -38.97% year on year; net profit after deduction of 490 million yuan, or -42.44% year on year; basic earnings per share was 1.23 yuan, compared to 2.02 yuan in the same period last year. The first quarter of 2024 achieved operating income of 1,361 billion yuan, +4.24% year on year; realized net profit of 243 million yuan, +21.39% year over year; realized net profit after deduction of 231 million yuan, +53.30% year on year; basic earnings per share were 0.51 yuan, compared to 0.42 yuan for the same period last year.
Gross margin declined slightly, and R&D investment increased. The company's gross margin in 2023 was 73.32%, -3.67pct year over year. On the cost side, the cost rate for the 2023 period was 61.72%, +2.25pct, of which sales expense rate/ management expense rate/ R&D expense rate/ financial expense ratio were 46.78%/8.10%/7.35%/-0.51%, respectively, and -1.17pct/+1.24pct/+1.24pct/+0.26pct, respectively. The company's net profit margin in 2023 was 9.59%, -5.53pct year-on-year. The company's gross margin for the first quarter of 2024 was 75.73%, +1.95pct year-on-year. Net margin was 17.89%, +2.49pct YoY.
The multi-sector business performed well, and the number of stores continued to grow. By product, in 2023, the company's raw materials/medical terminal products/functional skincare products/others achieved revenue of 1,129 billion yuan/1,090 billion yuan/3,757 billion yuan/999 million yuan, respectively, +15.34% compared with the same period of +15.22%/+58.95%/-18.45%/+15.34%, gross margins of 64.71%/82.10%/73.93%/51.64%, respectively, -6.83 pct/+1.24pct/-4.44pct/+ 17.67pct By channel, in 2023, the company's distribution/direct sales achieved revenue of 1,939 billion yuan/4.136 billion yuan respectively, +13.40%/-11.03% year-on-year, and gross margins of 68.65%/75.51%, respectively, -3.88pct/-3.12pct. The company's raw materials business uses a sales model that combines distribution and direct sales. It has established a stable distribution network in more than 70 countries and regions around the world and has an extensive customer base. As a long-term strategic partner of many internationally renowned pharmaceutical, cosmetics and health food companies, the company has accumulated more than 4,000 global customers. In some countries and regions, the company has cooperated with customers for more than 20 years, and has established a solid foundation of cooperation and a high degree of stickiness. The company's medical terminal products use a sales model combining distribution and direct sales, covering a wide range of domestic and foreign markets. The company is equipped with a professional medical market support team and has established stable cooperation with more than 5,000 partner institutions and more than 2000 medical experts. The company adheres to compliance management, provides consultants, doctors and operational enabling systems to help partners grow together. Professional support and an extensive cooperative network have jointly built strong market competitiveness. The company sells functional skincare products through a combination of online and offline channels. Currently, sales channels are mainly on several major online platforms such as Tmall, Douyin, JD, and Vipshop. The company has a large channel expansion space, and the number of users continues to grow. In the future, it will further bring room for development through private domain operations, channel sinking, and channel diversification. The company has established good in-depth cooperative relationships with major domestic e-commerce platforms such as Tmall and Douyin, and has jointly built a brand and traffic matrix with online and offline media to systematically explore and manage user demands and behavior. Relying on its own experienced e-commerce operation team and distribution management team, the company combines content operation and live streaming to accelerate reaching core customers and forming sales conversion, starting from the company's unique R&D capabilities. With the continuous output of high-quality content, the company continues to accumulate high-quality fans, and the increase in repurchase rates brought about by user stickiness helps increase product profit margins.
Investment advice: The company is a world-renowned biotechnology company and bioactive materials company. It is a platform enterprise for the entire hyaluronic acid industry chain integrating R&D, production and sales. Microbial fermentation is leading the world in hyaluronic acid production technology. With two major technology platforms for microbial fermentation and crosslinking, as well as six R&D platforms, including a pilot transformation platform, a formulation process R&D platform, a synthetic biology R&D platform, and an application mechanism research and development platform, the company has established a business system for the entire industry chain of bioactive materials, from raw materials to medical terminal products, functional skincare products, and functional foods. Driven by the skincare business, the company's 2023 performance was under pressure, but the 2024Q1 performance resumed rapid growth, and an inflection point began to appear. With the release of new production capacity, it is expected to drive a further increase in the gross profit of the raw materials business; as the effects of skincare brand expansion gradually become apparent, there is a possibility of further optimization on the cost side, and the company's profitability is expected to increase in the future.
The company's 2024-2026 EPS is predicted to be 1.71 yuan, 2.11 yuan, and 2.61 yuan respectively, and the corresponding PE will be 37.0X, 29.9X, and 24.36X, respectively, maintaining an investment rating of “increased holdings”.
Risk warning: new product development risk, new product registration risk, new technology substitution risk, new product substitution risk, risk of loss of core technical personnel