The company released its quarterly report for '24, and the results were in line with expectations. 24Q1-Q3 revenue was 2.803 billion yuan, down 17.45%; net profit to mother was 0.171 billion yuan, down 28.09%, mainly due to the impact of the real estate business divestiture last year; net profit not attributable to mother was 0.151 billion yuan, up 40.09%, mainly due to real estate divestment and improvement in cost control efficiency; 24Q3 revenue of 0.877 billion yuan, down 4.82%; net profit to mother was 0.044 billion yuan, down 7.76%, net of net non-return to mother Profit decreased by 12.15% to 0.039 billion yuan.

Profit margin increased, net margin decreased slightly: 24Q1-Q3 gross profit margin 51.85% (yoy+4.77pct), net profit margin 6.11% (yoy-0.90pct); sales expense ratio 36.47% (yoy+4.43pct); management expense ratio 4.25% (yoy-0.38pct); R&D expense ratio 3.70% (yoy+0.74pct). 24Q3 gross profit margin 51.81% (yoy-3.10pct); net profit margin 6.08% (yoy-1.22pct).

By business sector, cosmetics are slowing down, and raw materials are steady. (1) The 24Q1-Q3 cosmetics sector's revenue was 1.708 billion yuan, up 3.25% from the same period, and the gross profit margin was 62.32%. Among them, the revenue of the Yilian brand was 0.658 billion yuan, an increase of 7.57%; the revenue of the Dr. Eyre brand was 0.909 billion yuan, an increase of 1.80%. 24Q3 cosmetics segment revenue was 0.522 billion yuan, Yilian brand revenue was 0.211 billion yuan, and Dr. Eyre brand revenue was 0.264 billion yuan. (2) The 24Q1-Q3 pharmaceutical sector's revenue was 0.37 billion yuan, down 7.42% from the same period, and the gross profit margin was 50.48%. The 24Q3 segment generated revenue of 0.129 billion yuan.

(3) The revenue of the 24Q1-Q3 raw materials, derivatives and additives sector was 0.249 billion yuan, down 1.96% from the same period, and the gross profit margin was 39.39%. The 24Q3 segment generated 0.077 billion yuan in revenue.

The R&D side strengthens raw material reserves, and product upgrades on the brand side increase sales. On the R&D side, the company used royal jelly acid prepared by synthetic biology to complete the filing of new cosmetic ingredients and obtained a hyaluronic acid gel medical device product registration certificate. New 24Q1-Q3 products on the brand side led to growth. Yilian's spray product line 2.0 spray sales increased 21% year on year, moisturizer line used cream to drive sales of the same series of moisturizer products, sales of moisturizer products increased 54% year on year, new neck mask products online boosted the increase in this product line, soft film sales increased 22% year on year; Dr. Aier brand flash lotion upgraded, sales increased 12% year on year, probiotic mask sales increased 5% year on year; the KeMi Da broadcast channel mainly promoted gelatine sticks and collagen stickers, that is, the Mu Yin brand channel already promoted the Douyin brand Apply the new oil control and fluffiness shampoo.

Freda takes R&D advantages as the cornerstone, aims to build a full health industry chain, and works hand in hand in the cosmetics, raw materials, pharmaceuticals and other industries. The beauty brand matrix was initially formed, and both brands and platforms gained strength. Dr. Eyre's product upgrades welcomed the middle and high-end customer groups, and Yilian enjoyed cost-effective consumer dividends; the pharmaceutical star brand momentum was unabated, and new products were launched one after another; the raw materials sector expanded horizontally to move towards a multi-category raw material pipeline based on the world's leading hyaluronic acid technology, with strong growth momentum. We maintain our original forecast. We expect net profit to be 0.357/0.486/0.548 billion yuan for 24-26, corresponding PE of 21/15/14 times, maintaining a “buy” rating.

Risk warning: Consumption falls short of expectations; market demand changes; industry competition intensifies; raw material prices rise; traffic from advantageous platforms declines; and pharmaceutical regulations are becoming stricter.