The company released the 24H1 interim report, achieving operating income of 2.81 billion yuan, a year-on-year decrease of 8.6%, and net profit to mother of 0.34 billion, a year-on-year decrease of 19.5%. Among them, 24Q2 revenue and net profit to mother fell 18.1% and 56.1%, respectively. The company's net operating cash increased 42% year-on-year in the first half of the year.
According to the interim report, the company's comprehensive gross margin increased 0.7 percentage points year on year, mainly due to the increase in the share of medical and aesthetic revenue with high gross margin; however, the net interest rate fell 1.6 percentage points year on year, mainly due to the increase in management expenses and asset impairment due to the changes.
Raw materials business: Growth is steady, with export business showing impressive performance. 24H1 raw materials business revenue was 0.63 billion, up 11% year on year, of which export sales revenue was 0.328 billion, up 19.8% year on year. Looking at the subregions, sales volume continued to grow in Europe, Japan, America, etc., with sales revenue in the American region growing rapidly. In terms of product brands, the sales revenue of the main brand in the raw materials business increased steadily, and the revenue of the Forst brand increased 19.1% year over year.
Medical terminal business: Rapid growth, and the quality of medical and aesthetic business operations is gradually improving. 24H1 medical terminal business revenue was 0.74 billion yuan, up 51.9% year on year. Among them, the company achieved revenue of 0.555 billion yuan (medical and aesthetic business), an increase of 70.1% year on year, and revenue from micro-crosslinked moisturizer needles in the differentiated advantage category increased by more than 200% year on year. After 2-3 years of transformation, the company's medical and aesthetic business gradually deepened — revenue showed high growth, steady decline in cost rates, and gradual improvement in business quality. In terms of channels, 24H1 achieved a significant increase in the coverage rate of medical and aesthetic institutions and the number of single-agency cooperative products. Among them, the coverage rate of medical and aesthetic institutions increased by more than 50% over the same period last year.
Functional skin care products: Performance is under pressure and is still in a period of change and adjustment. 24H1 functional skincare business revenue was 1.38 billion, down 29.7% year over year. Currently, the company continues to make phased adjustments to its major brands, and it will take time for the effects of the changes to be reflected. In terms of channels, the company strengthened refined operation efficiency and increased the proportion of self-operated channels. During the 24H1 period, the proportion of self-operated channels of Moisturizing Baiyan and Bio-meso Skin Activation exceeded 60%.
In 2024, the company entered the “first year of change” to support the advancement of transformation projects with a culture of change, including business process reshaping, organizational and talent transformation, transformation of indicators and performance systems, and promotion of enterprise digital intelligence. Looking forward to the future, we believe that the company's raw materials business will maintain steady growth; the medical and aesthetic business is expected to continue to increase, and its contribution to the company's performance will gradually increase; the skincare business is still in the short-term adjustment period, and we look forward to the upward elasticity of later results.
According to the interim report, we adjusted our profit forecast. We expect earnings per share for 24-26 to be 1.46, 2.00, and 2.44 yuan (previously 1.7, 2.16, and 2.69 yuan), respectively, and the DCF valuation target price is 60.94 yuan, maintaining an “incremental” rating.
Risk warning: Increased industry competition, weakening terminal consumer demand, functional skincare business adjustments falling short of expectations, etc.