The company released its 2024 semi-annual report

The company's 24Q2 revenue was 0.33 billion, +28.9% YoY, net profit 0.014 billion, +1.7% YoY; 24H1 revenue 0.62 billion, +28.6% YoY; 24H1 revenue 0.62 billion, YoY net profit 0.033 billion, -9.4% YoY, 0.031 billion YoY, -13.1% YoY; revenue growth was due to increased sales of oral care products and new mergers Caused by the sale of probiotics.

By product, the company's 24H1 toothbrush revenue was 0.25 billion, +20.2%, accounting for 40.4%; wet wipe revenue was 0.2 billion, +32.6% year on year; probiotic products revenue was 0.015 billion, accounting for 2.4%; by region, the company 24H1 foreign revenue was 0.38 billion yuan, +112% year on year, accounting for 61.6%; domestic revenue was 0.24 billion, -21.2% year on year, accounting for 38.4%;

The company's 24H1 gross profit margin was 25.3%, +2.6 pct year on year; net profit margin to mother was 5.3%, -2.2 pct year on year.

By product, the gross profit margin of the company's 24H1 toothbrushes is 26.5%, the gross profit margin of wet wipes is 22.5%, and the gross profit margin of probiotic products is 18.4%;

By region, the company's 24H1 foreign gross profit margin was 27.1%; domestic gross profit margin was 22.4%.

On the cost side, the company's 24H1 sales/management/ R&D/finance expenses ratio was 7.1%/4.2%/3.3%/0.1%, respectively, +0.7pct/-0.9pct/+0.4pct/0.5pct. Among them, 24H1's sales expenses were 0.044 billion, +42.1% year-on-year, mainly due to increased investment in operating expenses of its own brands.

The industry is developing steadily, and the segments continue to expand

Dental industry: According to Euromonitor data, the overall market size (in terms of retail sales) of China's dental cleaning products industry from 2017 to 2023 showed an upward trend year by year. The compound annual growth rate from 2023 to 2028 is expected to be 3.75%. New categories such as oral spray and electric toothbrushes are developing rapidly in the segment. From January to June 2024, online retail sales of mouth spray and electric toothbrushes were +15% and +6.3%, respectively.

Wet wipe industry: According to Euromonitor data, the overall market size of China's wet wipe industry has maintained a growing trend, increasing from 6.74 billion yuan in 2017 to 11.6 billion yuan in 2023, with a CAGR of 9.46%. It is expected to reach 14.6 billion yuan in 2028. Among them, baby wipes are the category with the largest market share.

Probiotic industry: According to statistics from Intelligent Research, China's probiotic industry market size was 118.85 billion yuan in 2023, with a CAGR of 11.8% in 2019-2023, and it is predicted that the market size of China's probiotic industry will rise steadily from 2024-2030 to reach 203.28 billion yuan by 2030.

endogenous growth+epitaxial development

While growing endogenously, the company also adheres to an epitaxial development strategy. On April 7, 2024, the company obtained about 52% of Shanenkang's shares through equity transfer and capital increase, which was included in the scope of the company's consolidated financial statements.

Nanjing Yujie, a wholly-owned subsidiary of the company, participated in the online auction for 1.59% of Weizi's shares and finally successfully bid with a starting price of about 0.025 billion. After Nanjing Weijie obtains an auction transaction ruling and the parties complete other relevant share transfer procedures, the company's total shareholding ratio of Vimezi will increase to about 33.9%, which is conducive to further enhancing the collaborative value of the entire supply chain and better meeting consumer needs.

Adjust profit forecasts to maintain “buy” ratings

The company has an annual production capacity of 0.672 billion toothbrushes and 18 billion wipes, and occupies an important position in the oral hygiene products and disposable hygiene products industry. The subsidiary Sunenkang has gradually become an influential enterprise in the industry with its deep technical accumulation, extensive business layout, and excellent market performance.

Facing many uncertainties such as increasingly intense competition in the industry and the complex and changing international political and economic situation, based on the company's 24H1 performance, the company's net profit to mother declined year-on-year. We adjusted the profit forecast. The company's net profit to mother for 24-26 is 0.11/0.14/0.19 billion yuan respectively (previous values were 0.13/0.163/0.201 billion yuan, respectively), and the corresponding PE is 19/15/11X, respectively.

Risk warning: raw material price fluctuation risk; market competition risk; downstream market fluctuation risk; risk of disclosure of core technology, product formulation, and core data, etc.