Key points of investment
The company disclosed 2024H1 results: 2024H1 revenue of 2.811 billion yuan, yoy -8.61%; net profit to mother 0.342 billion yuan, yoy -19.51%; net profit not attributable to mother 0.316 billion yuan, yoy -12.38%. In 2024Q2, the company achieved revenue of 1.45 billion yuan, yoy -18.09%, net profit to mother 0.098 billion yuan, yoy -56.10%.
The overall pressure on 2024H1 is mainly due to the company's active strategic adjustments affecting market expansion, as well as short-term cost increases during the transformation period.
The cosmetics business continues to be adjusted, the product structure is optimized to create a large single product line, and self-operated channels are strengthened.
2024H1 functional skincare revenue was 1.381 billion yuan, -29.74% YoY, accounting for 49.29%.
Since 2023, the company has taken the initiative to propose changes to the functional skincare business and make phased adjustments to major brands. There have been breakthroughs in products and channels in 24 years: ① Product: Continue to create large single products and large single product series, and continue to promote new products. The online sales revenue of the 24H1 “White Gauze” series increased by more than 30%. The “White Gauze” product series accounted for 50% of Chaorun Baiyan's overall revenue. Runbaiyan laid out the collagen anti-aging field and launched the new product “Genki Bomb” several times; Mibel's “Blue Bandage” series revenue accounted for 60% of Chaomiber's overall revenue. ② Channel: Increase the proportion of self-operated channels. 24H1 Moisturizing and Bio-meso Skin Activating's self-operated channels account for more than 60%.
The raw materials business grew steadily, and medical terminals grew rapidly after the transformation. 2024H1 raw materials/medical terminals/functional food revenue was 0.63/0.743/0.029 billion yuan, respectively, +11.02%/-11.23% year-on-year, accounting for 22.47%/26.51%/1.73% respectively: ① Raw materials business: Thanks to continued deepening internationalization strategies, raw material export revenue also increased 19.30%, accounting for more than half of the raw materials business revenue, reaching 52.06%. 24H1 injection-grade non-animal-derived chondroitin sodium, medical device-grade recombinant collagen, pharmaceutical-grade small molecule HA, sterile HA, etc. have completed trial production; ② Medical terminals: After 2-3 years of transformation, dermatologic medical products achieved revenue of 0.555 billion yuan, an increase of 70.14%, and revenue from moisturizer dolls increased by more than 200%. The 24H1 Class III device “Sodium Hyaluronate Complex Solution for Injection” was approved and marketed by the NMPA in July 2024; the three types of organic water light products have entered the registration process and are expected to be the first batch of compliant water light indication products. The company expects self-developed three-class collagen to enter the clinical stage at 24H2; ③ Functional food: Currently, it is still in the early stages of adjustment and consumer education.
Gross margin remained at a high level, and cost rigidity led to an increase in the cost ratio during the period. ① Gross profit margin: 24H1 was 74.52%, year-on-year -0.72pct, 24Q2 gross margin was 73.38%, year-on-year -0.43pct; ② Period expense ratio: 24H1 -0.66pct to 57.54% year over year, 24Q2 increased +5.73pct, mainly management/sales/R&D expense ratio under rigid expenditure 24Q2 +2.24/+1.44/+1.38pct; ③ Net sales interest rate: combined with gross margin and expense ratio, and non-same income decreased by 38.23 Million yuan, 24H1 net sales margin was -2pct to 12% yoy, 24Q2 -6pct yoy to 7%.
Profit forecast and investment rating: Huaxi Biotech is the global leader in the hyaluronic acid industry, and the “four-wheel drive” integration advantage is stable. Considering the strategic adjustment and growth rate of the skincare sector, we lowered the company's net profit forecast for 2024-26 from 0.73/0.85/1.01 billion yuan to 0.65/0.77/0.92 billion yuan. The corresponding PE is 39/33/28X, respectively, maintaining a “buy” rating.
Risk warning: Competition in the industry intensifies, new product promotion falls short of expectations, etc.