The company's recent situation
Recently, we had in-depth exchanges with the company's management on the company's business situation and subsequent strategic plans. According to the company's announcement, during the 618 period (5.20-6.20), omni-channel sales in the cotton era also increased by more than 15%, and the growth of the medical sector is expected to gradually show after the epidemic. We believe that with the strengthening of the company's underlying capacity in the healthcare and consumer sectors, the company's current operations have entered a bottom-line recovery channel. Starting in Q2, revenue is expected to return to growth, and profitability is also expected to gradually improve.
reviews
1. In the cotton era, 618 sales growth improved, and the underlying capacity strengthening support quality improvement growth logic was gradually implemented. According to the company's announcement, during the 618 period (5.20-6.20), omni-channel sales in the cotton era also increased by more than 15%. Among them, sales of core items such as face towels, baby cotton towels, and gauze bath towels ranked first in the same category, and channels such as Douyin and Pinduoduo led the growth rate. We believe that the cotton era is gradually implementing the logic of improving quality and growth: 1) on the category side, the company focuses on strategic categories such as face towels and loungewear, promoting product iteration through fabric innovation and design optimization, and strengthening comprehensive product strength to protect the increase in market share; 2) On the channel side, offline companies are expected to maintain rapid exhibition stores, and the construction of online live e-commerce and private domain traffic is improving, which is expected to contribute to growth; 3) On the operating side, the company continues to promote refined operation and enhance brand building efforts, and its profitability is expected to improve steadily.
2. Conventional products in the medical sector continue to be developed, and the base rate is falling to normal, and subsequent growth is expected to gradually show. We expect 1) Conventional medical consumables: the company's high-end dressings, operating room consumables and other categories are leading, and the synergy effects of epitaxial mergers and acquisitions are expected to continue to show, and revenue is expected to continue to grow rapidly. Health and personal care focuses on core product creation and independent brand building, growth potential is sufficient, and the development of new traditional dressings and sales network construction continues to advance, and revenue is expected to improve steadily; 2) Infection protection products: Demand for products such as masks is still resilient, and the revenue scale of infection protection products is expected to reach 2-3 billion yuan in 24 years. Strong orders, etc., we expect the medical sector to follow Growth is expected to gradually recover.
3. Starting in Q2, the company's revenue is expected to return to growth. I am optimistic that the company will improve quality and rise in the medium to long term as a leading health enterprise with two-wheel drive for medical treatment and consumption. We believe that the company's current operations have entered the bottom recovery channel. Specifically, see: 1) Medical business: the company currently has successfully introduced domestic 2B hospitals and has plenty of overseas orders, and subsequent growth is expected to gradually show with the high base brought about by epidemic prevention products; 2) The cotton era: products, channels and other multi-dimensional underlying capabilities continue to be strengthened, supporting the continuous improvement of brand potential. Q2 revenue and profitability are expected to improve. The brand's overseas expansion is also progressing simultaneously, opening up new space for growth.
Profit forecasting and valuation
Keeping the profit forecast unchanged, the current stock price corresponds to 15/13 times P/E for 2024/25. The outperforming industry rating and target price remain unchanged at 41.3 yuan, corresponding to 24/20 times P/E in 2024/25, with 59% room for improvement compared to the current stock price.
risks
The epidemic has caused the risk of fluctuations in the company's performance, competition intensifies risks, and raw material prices fluctuate.