The company's 3Q23 medical supplies and consumer sector income continued to grow, but the profitability of the operating side fluctuated, mainly due to the increase in the price of raw materials, inventory treatment of protective products and other short-term factors, 4Q23 and the future is expected to gradually improve. Since 2023, the business sectors of the company have been gradually normalized. With the completion of business carding, the two major businesses of routine medical supplies / consumption are expected to accelerate growth in the future, which can be expected in the long run.
In the third quarter, the value-added income of the relocated property is 1.36 billion yuan, and the profit margin of the operating end fluctuates. 1) income and profit: the company's income in the first three quarters is 6.01 billion yuan /-21%, the net profit is 2.15 billion yuan / + 72%, the non-return net profit is 6.20 billion yuan /-46%, of which the 3Q23 income is 1.74 billion yuan /-30%, the return net profit is 1.47 billion yuan / + 310%, and the non-return net profit is 0.7 billion yuan /-78%. 3Q23 Company has calculated the return property value-added income of 1.36 billion yuan (after tax). The decline in overall performance is mainly due to the high base of disease control and prevention products in the same period last year. 2) profitability: 3Q23 gross profit margin 47.0%/+1.1pcts, month-on-month decline in 5pcts, deduction of non-net profit margin 4.1%/-9.2pcts, month-on-month decline in 2Q23 8.5pcts. The sales / management / R & D cost of 3Q23 Company is 4.9 yuan, 1.4 billion yuan, and the expense rate is 27.8%, 8.1%, 4.3%, year-on-year change + 9.7/+1.9/-1.2pcts. The decline in profit margin is mainly due to: 1) the increase in the cost of raw material cotton; 2) inventory treatment of disease prevention and prevention products.
Medical: revenue from conventional consumables grew by 26% in the first three quarters. Revenue in the first three quarters was 3.02 billion yuan /-38%, of which 3Q23 revenue was 830 million yuan /-48%. Among them, 1-3Q23 conventional medical consumables is 2.18 billion yuan / + 26%, and disease prevention and prevention related products are 820 million yuan /-74%. In terms of channels, domestic B-end (domestic hospitals and others), foreign sales and C-end sales (e-commerce + drugstores) account for 38%, 35% and 26% respectively. 3Q23 domestic demand for disease prevention and prevention products is at the bottom, the company through discounts, inventory subsidies and other ways to clean up product inventory, is expected to gradually enter the normalization in the future. The performance of health care is outstanding in conventional consumables.
Consumption: 3Q23 continues to grow, active marketing to create brand volume. 1-3Q23 income is 2.96 billion yuan / + 9%, of which 3Q23 income is 900 million yuan / + 4%. The sales of core explosive dry and wet cotton towels increased steadily, and the growth rate of adult clothing and other textile consumer goods in textile products was better. In terms of channels, offline store revenue has maintained double-digit growth, while online channels have maintained high single-digit growth. The overseas Division was set up in August to expand the active European and American markets in Southeast Asia. Since the second half of the year, the company has been active in marketing, including offline activities for brand spokesperson Guo Jingjing, official announcement Zhao Liying as the global spokesperson for home textile and home clothing, promotion of cotton characteristics, etc.
Risk factors: demand is lower than expected; product inventory digestion is not as expected; store expansion is not as expected; the risk of rising raw material costs.
Earnings Forecast, valuation and rating: taking into account the rising raw material costs of 3Q23 and the fluctuations in profitability caused by inventory liquidation, we reduce the company's net profit forecast for 2023-2025 to RMB 2.32, 12.0 trillion (the original forecast was RMB 26.3). The company is located in the two major consumer and medical tracks, with rich brand connotations, continuous category innovation, gradual efficiency improvement of channel fine operation, and broad space for long-term development. With reference to the valuation of excellent domestic brands (the current price of Biyinlefen / Anta / Li Ning Co. Ltd. corresponds to the consensus expectation of PE,wind on 16-20-13, 2024), taking into account the strong growth of consumption and the main medical industry after the elimination of disease prevention products, give the company 21 times PE in 2024. Corresponding to the target price of 42 yuan, maintain the "buy" rating.