Incident: Wu Zhong Aesthetics, a wholly-owned subsidiary of Jiangsu Wuzhong, disclosed information on the official account. Wu Zhong Aesthetics signed a strategic investment and cooperation agreement with Beijing Lilai Technology Co., Ltd. to obtain exclusive rights in Lilai Technology's injectable sodium hyaluronate - polydeoxyribonucleotide (“PDRN”) composite solution product.

The layout of innovative water and light pipelines is expected to benefit from scarce compliance. PDRN solution is a functional water light product. It has the effects of anti-inflammatory repair, skin texture improvement, and tissue regeneration on the basis of ordinary water light needles. PDRN's water light products have been used successfully overseas, and the brand “Placentex” under the Italian company MASTELLI and the brand “Lijulan” under the Korean company PharmaResearch are well known domestically. Currently, the main components of domestic Class 3 compliant water light products are mainly hyaluronic acid or collagen. Composite solution water light products are scarce. Up to now, no type 3 PDRN solution medical device products have been approved for marketing.

The PDRN compound solution products laid out by the company have entered clinical trials, and if successfully approved, it is expected to become one of the first batch of compliant PDRN products in China.

The promotion of Tong Yan Zhen Ai Sufei went smoothly, increasing the company's popularity in the industry. The company's first three-class medical device for medical and aesthetic injections, was approved in January 2024 and the first batch of institutional contracts were signed and released in April. At the same time, the company also held a number of academic forums and doctor training activities. As of the end of June 2024, Asfi had signed contracts with more than 200 organizations, and the overall promotion progress was smooth. The promotion of Aisufei has given the market a good understanding of Wu Zhong Aesthetics's ability to operate, which will help the company to continue to lay out new product pipelines through various methods such as BD in the future.

The follow-up pipeline is rich, and future collaborative sales will be carried out. The company's other medical and aesthetic product lines include hyaluronic acid, recombinant collagen, table linen, lipolytic needles, etc. The PDRN solution strategically invested in this time is a recycled water light product, improving the company's product layout in the medical and aesthetic pipeline and forming good collaboration with other categories.

Profit forecast and investment rating: The company's profitability is expected to continue to improve as the launch of Tongyan Needle and other pipeline products gradually advance. We predict that the company's EPS for 24/25/26 will be 0.16/0.31/0.50 yuan, and the corresponding PE will be 59.9/29.7/18.6X, respectively, to maintain the “gain” rating.

Risk warning: The approval and promotion of medical and aesthetic products is slower than expected; risk of agency business cooperation; risk of policy risk and medical accident risk in the medical and aesthetic industry; large capital investment during the business transformation and development period.