The company disclosed 24H1 interim results:

Revenue: 24H1 revenue of 95.58 million/ +178%, of which Q2 revenue was about 61.48 million yuan (+80% month-on-month) continued the high trend. Among them, GMV reached 56.2 million yuan+ during the 618 promotion period, with a year-on-year growth rate of 500%.

Profit: 24H1's gross profit margin was 52.7%, up 4.5 pct from month to month. Currently, it has gradually stabilized and improved. The gross margin is expected to continue to rise throughout the year. The net loss of 0.161 billion yuan accounts for about 168% of revenue, and the 262% share of 2023H1 has declined significantly.

Key highlights of the financial report

The skincare explosion exceeded expectations: Oma H1 volume drove skin care revenue of 47 million yuan + accounting for nearly 50% of the volume.

Pipeline progress has exceeded expectations: ① The processing of the 1 billion single-product topical lidocaine decaine cream has exceeded expectations, making it the fastest among similar products in the market, and is expected to be marketed 25 years earlier; ② the 1-billion-grade single-product minocycline foam is expected to be launched 24H2; ③ the 1.5 billion single-product finasteride is expected to be approved in 25 years.

The buyback reflects the management's long-term confidence: it is planned to implement the repurchase from 2024.7.15 to 12.31, with the relevant capital not exceeding HK$54.7 million, demonstrating the company's long-term confidence in development.

Regarding liquidity: The latest Hang Seng Index adjustment is still in the relevant index. There is no risk hair business in 2024: the repurchase rate of small white tubes increased significantly, and the proportion of selenium disulfide, OTC minoxidil, shampoo, etc. quickly increased to 34%

Revenue: 24H1 revenue of 47.6 million/ +39%, of which GMV reached 21.5 million yuan during the 618 period, continuing high growth.

Single product structure: ① The core single product, Xiaobai Tube Q1, has remained profitable for 16 months, with cumulative sales of more than 0.75 million bottles; ② Other products have accounted for 34% of total hair revenue (27% in 23 years), of which 1) sales of selenium disulfide lotion 24H1 increased 121 times year-on-year, and has sold nearly 0.7 million bottles in about a year; 2) OTC Minoxidil is new, further improving the product matrix with the most complete blue silk geometry.

Channel highlights: ① The repurchase rate of 24H1 cross-border products is about 40% (up about 10pct compared to 23 years); ② As of 24H1, the total number of Tmall Blue Silk Geometry flagship store members exceeded 0.02 million, an increase of 180% over the end of 2023; ③ 24H1 Jingdong Blue Silk Geometry flagship store customer service inquiry conversion rate was over 40%. ④ 24H2 is expected to expand the Douyin channel to focus on care and OTC products.

Skincare business: The explosion exceeded expectations by nearly half. It is expected that H2 will continue to sell 24H1 skincare products, and the revenue will exceed 47 million, significantly exceeding expectations, accounting for nearly 50% of total revenue.

The strong energy of large single products is the core driver: the oleocanthal series accounts for more than 70% of revenue.

Channel expansion has performed well. Among them, Tmall's share has rapidly increased to 46%, an increase of more than 8 times over the previous year.

Investment advice: The rapidly growing pan-dermatology treatment and care market is new, commercialization-oriented and innovation-driven. ① The pioneering commercialization breakthrough is the company's 22-year cooperation with France's Bailleul Minoxidil spray. ② The cooperative high-end efficacy brand Omar and its own hair brand selenium disulfide have achieved significant results in 2023, which is expected to drive rapid iteration of the second curve; ③ In the future, it will quickly shift from a single drive to multiple matrix iteration from large single French small white tubes. 24H2-25 will be an important point for the implementation of major pipeline minocycline foam, topical finasteride, and local anesthetic products. ④ Comprehensive pipeline layout and deep R&D reserves will drive the company to become a leading pan-dermatology platform enterprise. The company's short-term commercialization drives strong growth combined with high barriers on the long-term R&D side. It is expected to generate revenue of about 0.283/0.59/1.002 billion yuan in 2024-2026, maintaining the “recommended” rating.

Risk warning: the risk that a single product accounts for too much revenue; the risk of increased competition in the industry; the risk that online commercialization progress falls short of expectations; the risk that the pipeline R&D process falls short of expectations.