The company predicts that 1H24 net profit will increase by 286.1%-305.9%

The company issued a positive profit forecast: 1H24's revenue is expected to be 3.4-3.6 billion yuan, an increase of 114.3%-126.9%, and net profit of 0.39-0.41 billion yuan, an increase of 286.1%-305.9%. The performance forecast is in line with our expectations. The company's high revenue and profit growth was mainly due to the rapid growth of revenue from the main brand Han Shu through multiple channels, compounded by the sharp year-on-year increase in revenue from the second-tier brand Newpage. We are optimistic about the company's broad medium- to long-term growth space under its multi-brand, multi-channel, and multi-category layout.

Key points of interest

1. Han Shu's impressive multi-channel growth and the rapid launch of Newpage led to high revenue growth in the first half of the year. The company expects 1H24 revenue of 3.4-3.6 billion yuan, an increase of 114.3%-126.9%. By brand: ① Han Shu: Continuing the high growth trend. According to the Feigua, Jiuqian, and Tmall data we track, 1H24 Han Shu Douyin GMV exceeded 3.4 billion yuan, exceeding the full year of 2023, and Tmall and Jingdong GMV both achieved three-digit growth; by product, according to Feikou data, the Hongmanwaist series's potential energy did not decrease. 1H24 Douyin GMV accounted for about 68%. At the same time, the Bai Manwao series continued to increase in volume, 1Q/2Q24 Douyin GMV increased to 14%/Also, in April, a new product based on the innovative ingredient “Cyclohexapeptide-9” was launched Single product toner; ② One leaf: the skincare category focuses on popular skincare positioning, and brand adjustments are progressing steadily; ③ Red Elephant: initial results of brand adjustments, good feedback on new products such as children's cream; ④ Newpage: Quick Start. According to data from Jiuqian and Flying Melon, 1H24 Cat Flag+Douyin GMV also increased 167%.

2. The net interest rate of the 1H24 hub increased year-on-year and month-on-month, reflecting the company's good investment efficiency. Based on the performance forecast revenue and profit center, we estimate the 1H24 net interest rate of 11.4%. After excluding the impact of annual government subsidies, the net non-net interest rates of +5pp/+1ppt compared to 1H23 and compared to 2H23 were deducted, respectively, confirming that operating efficiency remained at a high level and cost control was good under high revenue growth.

3. Optimistic about the company's broad growth space under its multi-brand, multi-channel and multi-category layout. Looking ahead, we think the company's growth logic is clear: ① Skincare: Han Shu's main brand product matrix continues to be rich. At the same time, channels such as Tmall and Jingdong are growing rapidly and the offline CS channel layout is being restarted. Red Elephant brand adjustments are expected to enter a harvest period, while small brands such as Newpage and An Minyou are starting a strong trend. ② Care:

As the second-largest category focus, Han Shu launched care products through online channels. In May, Ichiyo launched a new care series around the concept of natural plants, and laid out offline channels such as CS. The 2032 brand incubated smoothly. Douyin launched relatively quickly, and the anti-hair loss brand is in steady reserve. We are optimistic about the company's broad growth space under its multi-brand, multi-channel, and multi-category layout.

Profit forecasting and valuation

Based on Han Shu's main brand and Newpage driving rapid revenue and profit growth, we raised our 24-25 profit forecast 15%/15% to 0.87/1.13 billion yuan. The current stock price corresponds to 24-25 16/12x P/E. Maintaining an outperforming industry rating, maintaining a target price of HK$55, corresponding to 23/18x P/E in 24-25, based on profit forecast adjustments and a recent decline in sector valuation, with 47% upside compared to the current stock price.

risks

Industry competition heightens risks, channel development progress falls short of expectations, and brand transformation results fall short of expected risks.