The recombinant collagen industry is booming, and there is plenty of room for penetration rate improvement. Collagen is an ideal ingredient in skin care products. Judging from the application field, medical dressings and effective skin care are the main application directions of recombinant collagen. According to Frost & Sullivan, the medical dressing/functional skincare market size in 2021 was 4.8 billion/46 billion, accounting for 44%/43% respectively. It is expected that the market size will increase to 255/64.5 billion in 2027, and the CAGR will reach 28.8%/55.0% in 2027, respectively. In addition, skin rejuvenation is also a rapidly developing field, with a CAGR of 36.5% in 2027, making it the third largest application area after medical dressings and effective skincare.

A leader in recombinant collagen, a leader in professional skincare. It is the first company in the world to successfully develop and mass-produce recombinant collagen products. It has eight major brands: Kefumei, Clarion, Kevepin, Riyan, Enoxine, and Senoside. Among them, the flagship brands Kefumei and Kalijin are revenue driven engines. The CAGR of revenue/net profit without return to mother in 2019-2023 was 38.5%/25.8%, respectively. The growth trend on both sides of revenue and deducted from non-return to mother is improving, mainly benefiting from the continued release of major celebrity products and the rapid expansion of superimposed online channels.

“Product & Channel & R&D” builds core competitive advantage. Product side: 1) Ke Mei is currently implementing a collaborative development strategy for makeup devices. The big single product strategy has achieved remarkable results, and the second tier is ready to go. The core single product Collagen Stick Essence is the first high-concentration repair essence in China with 4 types of recombinant collagen as the core ingredients. In 2023, 618 and Double 11GMV increased 700% + year over year, respectively. Compared with market competitor analysis, most of the main ingredients in the same price were hyaluronic acid and its derivatives, while Kefumei Collagen Stick captured consumers' minds with its booming recombinant collagen racetrack and professional medical background. In terms of the second tier, various products such as new collagen milk, toner 2.0, tonnage, and order series were introduced in 2023, and the product matrix was continuously expanded and upgraded; 2) Clekin: Positioning as a mid-high-end multi-functional effective skin care brand, and since 2022, it has launched Collagen Mask King, Collagen Bowling Cream, Film Eye Cream, Film Face Cream, etc., with good feedback on the promotion of new products, and some products are beginning to take the shape of a large single product; Channel side: implementing the “medical institution+consumer” dual-track sales strategy to build an omni-channel sales network.

On the offline side, the company has built offline sales channels for the medical structure, laying a solid foundation for building brand expertise. By the end of 2023, the company's products had established more than 1,500 public hospitals, more than 2,500 private hospitals and clinics, 650 pharmacy chains and 6000 CS/KA stores; on the online side, online channels for e-commerce and social media platforms were established through direct sales and distribution models, and online direct sales revenue through DTC stores grew the fastest, as the main driving force for direct sales growth; R&D side: The company continued to make breakthroughs in basic scientific research, development of new raw materials, process formulation optimization, product development and application, etc., and accumulated a rich patent layout, as of At the end of 2023, the company was authorized and applied for 93 patents; the company's recombinant collagen molecular bank has more than 40 types of collagen molecules, and the number is at the leading level in the industry and continues to grow. In addition, the company's differentiated card market is booming. The four recombinant collagen fillers (liquid, solid, gel and crosslinked gel) are applied to water light, eyebrow and crow's feet, nasolabial fold, nasolabial fold, and neck lines respectively. The first two models have already entered the clinical trial stage. 2024H2 is expected to be approved, and the latter two products are expected to be approved in 2025. After approval, they are expected to contribute to increased performance in the medical and aesthetic sector.

Profit forecast and valuation: We expect the company to achieve operating income of 4.70/60.8/7.56 billion yuan in 2024-2026, with year-on-year growth rates of 33%/29%/24%/24%, respectively, and net profit to mother of 18.6/23.1/2.82 billion yuan, with year-on-year growth rates of 28%/24%/22%, respectively. We selected Jinbo Biotech, which are also on the recombinant collagen circuit, and Pelaea, Marumi Co., Ltd., and Huaxi Biotech, which focus on effective skincare products, as comparable companies. The industry's comparable companies agree that the average PE is 30 times higher in 2024. The company's track is booming, and the company's two flagship brands in the cosmetics sector are improving. The growth trend of large single products continues to increase, and the company is expected to provide a new growth engine after Class III recombinant collagen products in the medical and aesthetic sector are expected to provide a new growth engine after they are launched. The company's growth path is clear. Long-term performance is highly deterministic, covered for the first time, and gives a “buy” ” Ratings.

Risk warning: risk of policy changes; industry competition increases risk; e-commerce channel competition increases risk; risk of new product incubation.