2024 and 1Q25 results fell short of our expectations
The company announced 2024 and 1Q25 results: 2024 revenue 2.017 billion yuan, +4.3% year on year; net profit to mother 0.661 billion yuan, -11.8% year on year; net profit after deducting 0.604 billion yuan, -17.0% year on year; 1Q25 revenue 0.301 billion yuan, -26.4% year on year; net profit attributable to mother 0.091 billion yuan, -39.8% year on year; net profit after deducting 0.053 billion yuan , -62.8% YoY. The performance fell short of our expectations, mainly due to the company's active sales channel optimization and product price sorting, which had a short-term impact on revenue. At the same time, the increase in e-commerce channels and R&D investment led to a significant increase in the cost side.
Development trends
1. The cosmetics business is growing rapidly, and the proportion of online direct sales channels continues to increase. The company's revenue in 2024 was +4.3% YoY. By category: ① Cosmetics: Revenue 1.164 billion yuan, +7.5% year over year, accelerated growth, mainly benefiting from the company's continuous launch of a variety of skincare products with targeted benefits to meet the diverse needs of consumers; ② Medical devices: revenue of 0.853 billion yuan, +0.3% year over year. By channel: ① Online channel: Revenue 1.108 billion yuan, +20.0% year over year, revenue share +7.2ppt to 55.0% year over year.
Among them, online direct sales revenue was 1.002 billion yuan, +26.8% year over year, accounting for an increase of 8.8ppt to 49.7%, becoming the main driving force for growth; online distribution+consignment revenue was 0.107 billion yuan, -19.9% year over year. ② Offline channels: Revenue of 0.908 billion yuan, -10.1% year over year, accounting for -7.2ppt to 45.0% year over year.
2. Gross margin declined slightly, sales expenses increased sharply, and profitability declined year-on-year. The gross margin of the 24/ 1q25 company was -0.5/+1.6ppt to 81.7%/83.0% year on year, mainly due to product structure optimization due to increased concentration of star products. On the cost side, the 24/1Q25 sales expense ratio was +9.6/+20.3ppt to 37.1%/52.9% year on year. Mainly due to the increase in the share of online direct sales revenue, the superposition company continued to increase promotion expenses; the management rate was -4.0/+2.0ppt to 4.27%/7.4% year over year, and the R&D rate was +0.03/+1.8ppt to 1.7%/3.3% year over year. In the end, 24/1Q25, the company's net interest rate was -6.0/ -6.7ppt to 32.78%/30.4% year-on-year, after deducting non-net interest rates -7.7/-17.1ppt to 29.9%/17.6% year-on-year, respectively.
3. Continue to promote R&D investment and channel optimization, and focus on performance after the adjustment period. Looking forward to the future, we believe: ① Product side: The company continues to increase R&D investment and establish a Shanghai R&D center to increase research on new raw materials and technologies through industry-university-research cooperation; in terms of medical devices, the company previously disclosed that the medical and aesthetic product “recombinant type III humanized collagen freeze-dried fiber” under development has entered clinical trials; in terms of cosmetics, it consolidates a product matrix centered on masks and is complemented by other categories to create products around a series of effects such as repair, acne removal, whitening, anti-wrinkle, and sunscreen. ② Channel side:
The company is in an adjustment period of sales channel optimization and product price sorting. Optimizing the organizational structure online is expected to continue to grow rapidly and continue to adjust and optimize offline. Follow the company's subsequent new products and online progress.
Profit forecasting and valuation
Considering that the company is still in the business adjustment stage, the 25-year net profit forecast was lowered by 16% to 0.696 billion yuan, and the 26-year forecast was introduced by 0.733 billion yuan. The current stock price corresponds to 18/17 times P/E for 25-26. Maintaining an outperforming industry rating, opening up medium- to long-term space based on profit forecast adjustments, company channel optimization, and product expansion. The target price was lowered by 8% to 39.1 yuan, corresponding to 22/21x P/E in 25-26, with 23% upward space.
risks
Competition in the industry continues to intensify; marketing costs are growing rapidly; brand expansion falls short of expectations.
