Core views

24Q2 revenue was +2.92% year-on-year, with net profit of 0.019 billion yuan (-0.75 million in the same period last year), mainly due to AestheFill's polylactic acid facial filler being certified in January '24, promotion and communication began in March, and officially launched in April. 24H1 Medical & Aesthetic Biotechnology's revenue was 0.08 billion/ +2694.30%, corresponding to a gross profit margin of 82.9% and an operating profit margin of 41.7%.

The company will speed up channel development and doctors' education and training, and subsequent promotion will contribute to increased performance. In addition to this, the medical and aesthetic circuit has sufficient reserves of products. The future focus will be on the progress of products such as hyaluronic acid (which is expected to be submitted for registration by the end of 24 and approved by the end of 25), PDRN, collagen, table linen, and lipid-dissolving.

occurrences

The company released its 2024 semi-annual report: 24H1 revenue of 1.207 billion yuan/ +9.62%; net profit to mother 0.024 billion/ -10.75%, net net profit of 0.011 billion yuan/ +417.83%, net cash flow from operating activities in the first half of '24 was 0.153 billion yuan/ +225.13%, weighted average return on net assets was 1.39% /-0.11pct, basic EPS was 0.034 yuan/share, same Compared to -10.53%.

Brief review

The smooth progress of the medical and aesthetic product Aisufei led Q2 to turn a loss into a profit. 24Q2's revenue was 0.503 billion yuan/ +2.92%, and net profit was 0.019 billion yuan (-0.75 million in the same period last year), mainly due to AestheFill, a polylactic acid facial filler in the medical and aesthetic sector, obtained the “Medical Device Registration Certificate” issued by the China Drug Administration in January '24, and was officially launched for sale in April '24. 24Q2 gross margin was 40.66% /+9.30pct, and 24Q2 net margin was 3.95%.

By product, the medical and aesthetic business performed well, and the basic pharmaceutical market remained stable. 1) Pharmaceutical revenue 0.857 billion/ -6.26%, with revenue accounting for 71.01%, of which pharmaceutical industry revenue was 0.32 billion yuan and pharmaceutical commercial revenue was 0.537 billion yuan; 2) Medical and Aesthetic Biology 24H1 revenue 0.08 billion/ +2694.30%, accounting for 6.64% of revenue. The medical, aesthetic and biological sector gross profit was 0.066 billion yuan, contributing 19% of gross profit.

Mainly Aesofei products are being promoted smoothly, and the number of 2024H1 collaborations continues to increase, including many medical and aesthetic chain brands such as Meilai, Huahan, Art Star, Uniliger, Fuai, and Milan Baiyu. At the same time, the company is also continuing to strengthen terminal doctor training to better serve the needs of beauty seekers. The company held a number of expert meetings and mentor training activities to further expand the coverage of doctor training.

The medical and aesthetic business drives increased profitability, and overall expenses were properly controlled. 2024H1's gross profit margin was 29.1% /+1.2pct, mainly driven by Q2 high-margin medical and aesthetic business. Among them, the gross margins of the pharmaceutical, medical, aesthetic, and trade businesses were 31.7%, 82.9%, and 4.3% respectively. 24H1 net profit margin 2.0% /-0.4pct.

On the cost side, 2024H1 sales, management, and R&D expenses rates were 17.40%, 4.89%, and 1.70%, respectively; -0.13, +0.12, and +0.15pct; 24Q2 sales, management, and R&D expenses rates were 24.83%, 6.34%, 2.05%, and 3.62%; +3.61, +1.22, +0.42, and +0.40pct year over year.

The medical and aesthetic circuit has sufficient reserves of products to provide momentum for subsequent growth. In addition to the already marketed Aisufei Tongyan Acupuncture, the company lays out clinical research on various injections and auxiliary products such as recombinant collagen, hyaluronic acid, ripropyl dicaine cream, and fat-dissolving needles through agents, cooperation, and self-development. Among them: 1) Hyaluronic acid: Through Shang Li Huimei, the Korean medical and aesthetic company Hu med ix is steadily advancing clinical work on the latest injectable biphasic crosslinked gel product containing lidocaine sodium hyaluronate, and has completed clinical enrollment in 23 years; 2) Collagen field: Recombinant type II humanized collagen biosynthesis technology with a trimer structure has been exclusively introduced from overseas, and collaborated with Nanjing Dongwan to promote clinical research on medical and aesthetic implant products based on recombinant type I human collagen, expand the injectable upstream product pipeline to promote recombinant collagen Lyophilized protein fiber, recombinant Pre-clinical research and development of two collagen implant products has enriched the company's matrix layout in the field of recombinant collagen. 3) PDRN: The company cooperated with Lilai Technology on PDRN, a functional anti-inflammatory water light product, which is currently in the clinical trial stage.

Investment advice: The company's revenue for 2024-2026 is expected to be 2.734, 3.322, 3.79 billion yuan, +22.1%, +21.5%, +14.1% year over year, net profit to mother of 0.113, 0.227, 0.349 billion yuan, +257.0%, +101.2%, and +53.4%, corresponding PE is 53X, 27X, 17X, maintaining the “increase” rating.

Risk warning:

1) Industrial policy impact: The pharmaceutical industry is one of the industries most profoundly affected by national policies, involving various government departments, ministries and agencies such as national health insurance, health care, drug supervision, industry and information technology, and intellectual property. The implementation and promotion of a series of new policies, such as centralized procurement of drugs at the national and local levels, rational drug use and restriction of adjuvant drug use policies, control of the growth rate of medical expenses, adjustment of medical insurance payment methods and payment prices, adjustment of the basic drug catalogue, tilting the medical insurance catalogue towards cost-effective innovative drugs, biosafety and environmental protection are all related to the production costs and profit level of the entire pharmaceutical industry. The industry competition pattern continues to improve.

2) Technological innovation risk: If the development progress and direction of drugs do not match future market demand, or poor sales due to factors such as increased competition after the launch of the new drug, it may affect the recovery of early investment and the achievement of economic benefits, which in turn adversely affects the company's profit level and development.

3) Medical and aesthetic business R&D and promotion have fallen short of expectations: The company is currently strengthening the management of existing R&D projects and accelerating the R&D and clinical registration of existing product pipelines.