The company released the 2023 annual report and the 2014 quarterly report
24Q1 revenue of $1,909 million decreased by 18.8%; refunded to mother 180 million, decreased by 51.6%; after deducting non-140 million, decreased by 53.5%;
23Q4 revenue of 2.175 billion yuan, a decrease of 41.4%; net profit due to mother - 1,567 million yuan, a decrease of 491.4%; deducted from non-return mother - 209 million yuan, a decrease of 150.7%;
The main reason why the company's 23Q3 net profit was high and 23Q4 net profit was low is that ① 23Q3 confirmed disposal revenue of 1.36 billion yuan for urban renewal projects; ② 23Q4 due to the suspension of progress of urban renewal projects, the company recovered 1.36 billion yuan in disposal revenue from the aforementioned projects. The net profit of 23Q4, after excluding the factors of urban renewal and transformation, was still mainly due to ① impairment of goodwill loss of 188 million yuan; ② large net loss due to disposal of inventory of infection protection products and related equipment.
23A revenue of 8.185 billion yuan, a decrease of 27.9%; net profit attributable to mother was 580 million yuan, a decrease of 64.8%; deducted from non-return mother of 412 million yuan, a decrease of 73.6%.
The decline in performance in '23 was mainly due to (1) a sharp drop in market demand for infection protection products due to public health events, and operating income decreased by about 3.82 billion yuan compared to the previous year, which led to a sharp decline in the company's net profit due to treatment of infection protection products and disposal of infection protection production equipment in 2023, which reduced net profit to mother by about 250 million yuan; and (3) impairment of the company's goodwill.
In 2023, the company paid a total cash dividend of 292 million yuan, with a dividend rate of 50.3%.
By category, 1) Among medical consumables: traditional wound care and bandage products, end wound dressing products, operating room consumables products, infection protection products, health and personal care products, and other products, revenue was 11.53, 5.95, 5.55, 9.12, 2.99, and 347 million yuan, respectively, up +7%/+28%/+18%/-81%/-5%/+89%, respectively. 2) In healthy lifestyle consumer goods: wet and dry cotton towels/sanitary napkins/other non-woven products/baby apparel and products/adult apparel and products/adult clothes/other woven products were 11.87/5.93/3.81/8.36/ 414 billion yuan respectively, up +3%/+0.3%/+0.3%/+22%/+17% respectively.
As a core popular product, sales of wet and dry cotton towels have steadily increased, and the market share has remained leading; thanks to the recovery of offline sales, adult clothing and other textile products (mainly bedding and bathroom products) that place more emphasis on experience are growing at a remarkable rate. Excluding infection protection products, the conventional medical consumables business achieved revenue of 2.95 billion yuan, and the consumer goods business achieved revenue of 4.26 billion yuan, up 17.3% and 6.4% year-on-year respectively, reflecting the resilience of steady long-term medical development.
The gross profit margin in '23 was 49%, up 1.6 pct; the net profit margin was 7.7%, down 7.1 pct. the total company rate in '23 was 37.2%, and the same increase was 10.3pct. Among them, the sales rate was 25.5%, an increase of 7.5 pct; the management rate was 8.5%, an increase of 2.9 pct; the financial rate was -0.8%, an increase of 0.3 pct, mainly due to a decrease in exchange earnings; and the R&D rate of 3.9%, a decrease of 0.4 pct, mainly due to a decrease in R&D investment.
Medical consumables: The impact of the high base of infection protection products was significant. In 2023, the conventional products business developed steadily. Under the influence of the high base of infection protection products in the previous year and the sharp drop in market demand this year, medical consumables revenue was 3.86 billion yuan, a decrease of 47%. On the other hand, as the basic business market, the conventional medical consumables business achieved revenue of 2.95 billion yuan, an increase of 17%.
Through the acquisition of targets such as Longtai Medical, Stable and Safe, and Stable Guilin, the company has increased its product line in the fields of high-end wound dressings, injection-puncture consumables, latex gloves, condoms, etc., and has strongly improved the industrial layout.
In terms of channels, the company's C-side business was actively developing. E-commerce and domestic pharmacies had revenue of 630 million yuan and 330 million yuan respectively during the year, accounting for 24.7% of the total revenue in the medical sector. Domestic e-commerce explosions are more clear and focused; cross-border e-commerce is growing rapidly, and it continues to lead the ranking of major core product categories on the cross-border e-commerce Amazon platform. In terms of domestic pharmacies, more than 190,000 OTC pharmacies were covered at the end of the period, and more than 40,000 were added during the year, with remarkable expansion results.
Consumer goods for healthy living: Outstanding product advantages, significant improvement in store efficiency, and continued to consolidate brand building in the 2023 cotton era, focusing on the three major scenarios and implementing explosion-product strategies, with revenue of 4.26 billion yuan in 23 years; while the previous year's base was not significantly lower, the same increase was 6.4%, up 41.7% from 2019, showing strong development resilience.
In terms of channels, the cotton era diversified online and offline channels, including traditional third-party platforms such as Tmall, JD, and Vipshop, e-commerce platforms such as Douyin and Xiaohongshu, and its own platforms such as official websites and applets; offline strategies were directly managed by first-tier and second-tier cities, and joined by core third- and fourth-tier cities; at the same time, through offline experience and online repurchase models, multiple channels were deeply integrated, and the advantages of multiple platforms complement each other.
In 2023, based on the omni-channel layout, the Cotton Era actively expanded the high-quality offline supermarket chain and instant retail business; the online Douyin circuit was thoroughly laid out and operated in detail. By the end of '23, the number of members worldwide was approximately 52.42 million, an increase of 21%.
The offline market recovered at an accelerated pace in 2023, and offline stores became the main channel driving revenue growth in the cotton era. In '23, offline store revenue was 1.36 billion, up 18.7%. The company actively embraces digital transformation, uses smart shelves and other tools to adjust the display according to different types of stores, and gradually explores ways to improve floor space efficiency using cabinet efficiency and quality efficiency as a starting point. Store floor efficiency increased by about 15% year-on-year during the year.
At the same time, according to the established expansion strategy, the company actively accelerated the pace of opening stores. Within 23 years, 84 new stores were opened (42 new direct-run stores and 42 franchise stores). By the end of '23, the number of offline stores reached 411 (including 337 direct-run stores and 74 franchised stores).
The 2023 Cotton Era continues to cultivate online channels, enhance refined operation capabilities, focus on the matrix of new products and popular models, strengthen mutual penetration between categories, and increase the conversion rate of new customers and repeat customers through in-depth operating methods such as brand activities, content communities, and membership systems.
Adjust profit forecasts to maintain “buy” ratings
Considering the decline in market demand for infection protection products, we have adjusted our forecast. The company's revenue for 24-26 years is 87.62/97.34/10.402 billion yuan (the previous value was 112/124 billion yuan, 24-25 years ago), the net profit to mother is 9.5/10.8/1.19 billion yuan (the value was 16.5/1.88 billion yuan respectively 24-25 years ago), EPS was 1.62/1.84/2.02 yuan/share, respectively, and the corresponding PE was 19/17/15X, respectively.
Risk warning: Risks such as rising raw material costs; slowing store efficiency growth; weak terminal consumption, and repeated COVID-19.