Organizational management changes continue to put pressure on short-term performance. We expect the company to release an annual report and quarterly report at an inflection point in 2025: achieve revenue of 5.371 billion yuan (-11.6% year over year, same below) and net profit to mother of 0.174 billion yuan (-70.6%) in 2024; 2025Q1 achieved revenue of 1.078 billion yuan (-20.8%) and net profit of 0.102 billion yuan (-58.1%) to mother. Considering the temporary business adjustment period, we lowered the 2025-2026 period and added a profit forecast for 2027. The company's net profit for 2025-2027 is 0.439/0.581/0.742 billion yuan (the original value for 2025-2026 was 0.722/0.901 billion yuan), the corresponding EPS is 0.91/1.21/1.54 yuan, and the PE corresponding to the current stock price is 52.3/39.5/30.9 times. The company is a leader in the four-wheel drive hyaluronic acid industry chain. We expect the company to return to growth after completing strategic adjustments, have a reasonable valuation, and maintain a “buy” rating.
The skincare business is under pressure, the raw materials business is steady, and the medical terminal business is growing well by business in 2024. (1) The skin science innovation transformation business achieved revenue of 2.569 billion yuan (-31.6%) and a gross profit margin of 72.8% (-1.1 pct), with increased market competition and business strategy adjustments putting pressure on revenue; (2) the medical terminal product business achieved revenue of 1.44 billion yuan (+32.0%) and gross profit margin of 84.4% (+2.3pct); (3) the raw materials business achieved revenue 1.236 billion yuan (+9.5%), gross profit margin 65.6% (+0.9pct), and the gross margin of pharmaceutical-grade hyaluronic acid raw materials was 87.6%, maintaining a high level. In terms of profitability, gross margins for 2024/2025Q1 were 74.1% (+0.8pct)/72.2% (-3.6pct), respectively. In terms of expenses, the sales/management/R&D expense rates in 2024 were -0.9 pct/+4.2 pct/+1.3 pct, respectively. The increase in management expenses was mainly due to the increase in employee remuneration, depreciation and amortization expenses, and institutional consulting fees during the transformation.
Promote comprehensive changes in an orderly manner, and can be expected to return to growth in the future
(1) Raw materials: Pharmaceutical grade raw materials are growing steadily, and it is expected that new PDRN and sterile HA products will contribute more; cosmetic ingredients will continue to grow. (2) Medical terminals: In 2024, the company covered 7,000 medical and aesthetic institutions, including more than 5,000 institutions covered by Runzhi Doll acupuncture, and revenue doubled year-on-year; a new product of Runzhi Geger was released in October, and sales exceeded 10 million yuan by the end of 2024. (3) Functional skincare products: Runbaiyan is deeply involved in the barrier repair series, which accounts for more than 50% of revenue in 2024; in addition, Runzhi launched a neck line lightening and firming series to deepen the mentality of “daily effective skincare+treatment combined with mechanical makeup+customized skin care”; Quadi focused on the anti-aging circuit to build the CT50 Super Elastic Series. We expect to contribute flexible revenue to the company after the adjustments to the skincare business are completed.
Risk warning: Terminal product promotion falls short of expectations, risk of losing core personnel, and intensifying industry competition.
