In the first quarter of '24, revenue increased 11.42% year over year, and net profit to mother increased 15.83% year over year. The company achieved operating income of 1,400 million yuan in the first quarter of 2024, +11.42% year over year; realized net profit of 82 million yuan, +15.83% year over year; realized net profit after deduction of 79 million yuan, +25.02% year on year; basic earnings per share was 0.19 yuan, compared to 0.16 yuan for the same period last year.

The gross margin increased sharply by 3 pct, and the cost ratio increased slightly by 1 pct. The company's gross margin for the first quarter of 2024 was 59.54%, +3.06pct year-on-year. On the cost side, the cost rate for the first quarter of 2024 was 51.46%, +1.44pct year on year. Among them, sales expense rate/management expense rate/R&D cost rate/financial cost ratio were 40.05%/8.13%/1.97%/1.32%, respectively, and +1.80pct/-0.13pct/-0.49pct, respectively. The company's net margin for the first quarter of 2024 was 6.41%, +0.87pct year over year.

It acquired Jimei in Zhengzhou and increased its performance. On February 28, 2024, Beijing Langzi Medical Management, a wholly-owned subsidiary of Langzi Co., Ltd., signed “Equity Transfer Agreements” with Wuhu Bochen 9, Wuhu Jujin, and Wu Hongming respectively. Beijing Langzi Medical Management plans to acquire 70%, 18%, and 12% of the shares of Zhengzhou Jimei Medical Beauty Hospital Co., Ltd. held by Bochen 9, Wuhu Jujin, and Wu Hongming respectively in cash.

According to the evaluation report issued by Yinxin Asset Appraisal Co., Ltd. (No. S00007), the total equity value of shareholders in Jimei, Zhengzhou after using the earnings method was 155 million, using December 31, 2023 as the evaluation reference date. Based on the above evaluation results, as agreed by the parties involved in the transaction, the transfer prices of 70%, 18%, and 12% of the shares in Jimei, Zhengzhou were 108 million yuan, 28 million yuan, and 19 million yuan respectively, for a total of 155 million yuan. Jimei, Zhengzhou, was included in the scope of the company's consolidated statements in the first quarter of 2024.

Investment proposal: The company is positioned in the middle and high-end women's clothing market. The business covers the three major business segments of fashion women's clothing, medical beauty, and green babies to create a pan-fashion business ecosystem where multiple industries are interconnected and developed collaboratively. From apparel to medicine and beauty, the company has established a fashion brand phalanx with multi-level and multi-stage requirements. By business, the women's clothing business is expected to continue to improve its brand image and accelerate development under channel optimization; in the infant business, future profitability is expected to gradually increase as domestic market popularity opens up and market share rises steadily; the medical and aesthetic sector, as a growth point for the company's performance, accelerates expansion through self-building+mergers and acquisitions models, and has sufficient momentum to develop new institutions, along with investment in mergers and acquisitions funds to accelerate the incubation of high-quality targets. In the future, after opening up consumer mentality, customer acquisition costs will decrease and drive the company's operational efficiency to improve. The company's 2024Q1 performance was excellent, and both revenue and net profit increased, and there is a trend of further unlocking profit potential in the future. The company's 2024-2026 EPS is predicted to be 0.71 yuan, 0.85 yuan, and 0.94 yuan respectively, and the corresponding PE will be 25.0X, 20.9X, and 19.0X, respectively, maintaining the “gain” rating.

Risk warning: Risk of rising human resources costs, risk of medical malpractice and loss of medical personnel, risk of market competition, risk of business model change, financial risk.