Report summary:
Incidents:
Huaxi Biotech released its 2024 semi-annual report. 24H1 achieved revenue of 2.811 billion yuan/ -8.61%, net profit to mother 0.342 billion yuan/ -19.51%, net profit of 0.316 billion yuan/ -12.38% after deducting non-return to mother, and non-recurring profit and loss of 0.026 billion yuan, mainly from government subsidies. Q2 In a single quarter, the company achieved revenue of 1.45 billion yuan/ -18.09%, net profit attributable to mother 0.098 billion yuan/ -56.10%, after deducting non-attributable net profit of 0.084 billion yuan/ -59.70%.
Comment:
The effects of medical and aesthetic transformation are showing, and skincare products are constantly being adjusted. 2024H1 achieved revenue of 2.811 billion yuan/ -8.61%. By product: 1) Raw material product revenue was 0.63 billion/ +11.02%/accounting for 22.41%, of which export raw materials were 0.328 billions/ +19.30%/accounting for 52.06% of raw materials; domestic and international raw material businesses all increased steadily. Thanks to the company's continuous promotion of localized operation strategies, sales in Europe, America and Japan continued to grow. 2) Revenue from medical terminal products was 0.743 billion/ +51.92%/accounting for 26.43%, of which revenue from dermatological medical products was 0.555 billion/ +70.14%, and revenue from microcrosslinked Runzhi doll needles increased by more than 200%. The medical and aesthetic business continued to change and actively promote innovation, and revenue increased significantly; in addition, revenue from orthopedic injections was 0.119 billions/ +23.47%. 3) Functional skincare revenue is 1.381 billion/ -29.74%/accounting for 49.14%. Each skincare brand is still undergoing phased adjustments, and the effects of the changes are yet to be seen. 4) Functional food revenue 0.029 billions/ -11.23%/accounting for 1.04%. The business is still in the early stages of adjustment and consumer education. 5) Other business revenue 0.028 billions/ +34.49%/accounting for 0.98%. By region: domestic revenue 2.313 billions/ -12.78%/accounting for 82.28%, overseas revenue 0.498 billions/ +17.48%/accounting for 17.72%.
Quality and efficiency continued to be improved, and the cost rate decreased slightly. The cost rate for the 24H1 period was 57.54% /-0.66pct, of which: the sales expense ratio was 41.93% /-4.25pct, the company strengthened marketing efficiency, and online promotion service fees were drastically reduced; the management fee rate was 8.77% /+2.09pct, which increased expenses such as depreciation and amortization; the R&D expense ratio was 7.13% /+1.06pct, which was mainly due to a decrease in interest income.
Investment suggestions: The results of the company's medical and aesthetic business transformation are showing, rapidly unleashing growth potential; active adjustment of skincare products is expected to gradually recover by relying on deep brand accumulation and complete channel operation strategies. Considering that skincare products are still in the business optimization period and profit forecasts are adjusted, revenue for 2024-2026 is expected to be 6.143 billion/7.249 billion/8.418 billion, respectively, net profit to mother of 0.718 billion/0.912 billion/1.109 billion, and corresponding PE is 33 times, 26 times /21 times, respectively. Give it an “gain” rating.
Risk warning: Market competition intensifies; consumption power declines; business adjustments fall short of expectations; performance forecasts and valuation judgments fall short of expectations.