Event: Sound Medical released the 2023 quarterly report. In 2023Q1-3, the Company realized operating income of RMB 6.01 billion yuan, with a year-on-year decrease of 21.35%; net profit attributable to parent was RMB 2.148 billion yuan, with a year-on-year increase of 71.78%; net profit attributable to parent after deduction of non-profit was RMB 621 million yuan, with a year-on-year decrease of 45.95%. Among them, in Q3 of 2023, the Company realized operating income of RMB 1.744 billion yuan, with a year-on-year decrease of 29.82%; net profit attributable to parent was RMB 1.466 billion yuan, with a year-on-year increase of 310.15%; net profit attributable to parent after deduction of non-profit was RMB 71 million yuan, with a year-on-year decrease of 78.41%.
Healthy living consumer goods develop steadily, brand of cotton era goes to sea
23Q1-3 Company realized revenue of 2.96 billion yuan for healthy living consumer goods, with a year-on-year growth of 9%, and 23Q3 realized revenue of 900 million yuan, with a year-on-year growth of 4%. According to different products, the sales volume of dry and wet cotton soft towels of core explosive products increased steadily, and the growth rate of adult clothing and other textile consumer goods among textile products was relatively good.
According to different channels, 1) E-commerce: online channels focus on new products and explosive matrix, strengthen mutual penetration among categories, strive to improve the conversion rate of new products and the re-purchase rate of old customers, and maintain high single-digit growth in 23Q1 -3 online channels. As of the end of June 2023, the number of global members was about 48 million, an increase of 12.1% compared with the end of last year. 2) Offline stores and supermarkets: 23Q1-3 offline stores keep double-digit growth in operating revenue accumulatively, which plays a significant role in driving the overall growth rate. In terms of brand construction, on October 18, Zhao Liying, an actor sent by the official propaganda force, acted as the global spokesperson of home textile clothing, interpreting the comfortable and comfortable cotton lifestyle. At the same time, Cotton Times established an overseas business department in August to actively explore Southeast Asia and Europe and America, which will further promote the brand to the world.
Infection protection income was under pressure due to high base. The revenue of conventional medical consumables increased steadily in 23Q1 -3, with revenue of RMB 3.002 billion yuan, down 38% year-on-year, and revenue of RMB 829 million yuan in 23Q3, down 48% year-on-year. According to the announcement, we calculated that the revenue of infection protection products in Q1-3 was 824 million yuan, with a year-on-year decrease of more than 70%. 2) 23Q1-3 Conventional medical consumables products achieved revenue of 2.178 billion yuan, up 25.93% year-on-year.
According to different channels, 1) 23Q1-3 Company's revenue from domestic B-end (domestic hospitals and others), foreign sales and C-end sales (e-commerce + pharmacies) accounted for 38.07%, 35.45% and 26.48% respectively. The company continuously strengthens the construction of medical brand, aiming to provide better wound care, surgical control and other solutions for patients, actively participates in various industry conferences, and enhances brand professional recognition.
Profitability level continues to improve, cost reduction and efficiency enhancement have achieved outstanding results
In terms of profitability, the gross profit margin of 23Q1 -3 Company was 50.17%, with a year-on-year growth of 2.30pct, among which the gross profit margin of 23Q3 was 47.03%, with a year-on-year growth of 1.10pct. 23Q3 gross profit margin continued to improve year-on-year, mainly due to changes in product structure.
In terms of period expenses, the company's period expense ratio in Q1-3 was 34.40%, with a year-on-year increase of 6.44pct; the sales/management/R & D/finance expense ratio was 24.05%/7.16%/4.47%/-1.28%, respectively,+5.73/+0.89/-0.43/+0.24pct year-on-year. Among them, the increase in sales expense rate is mainly due to the adjustment of the company's revenue scale and the increase in brand marketing efforts. Under the comprehensive influence, the net interest rate of 23Q1 -3 Company was 36.37%, with a year-on-year growth of 19.79pct; among them, the net interest rate of 23Q3 was 84.87%, with a year-on-year growth of 70.00pct, mainly from the disposal income of large assets.
Investment suggestion: The company will continue to build a large health product system with "medical + consumption" two-wheel drive, and at the same time continuously strengthen online and offline omni-channel sales, with obvious competitive advantages, which is expected to maintain stable growth. We estimate that the operating income of Steady Medical Care from 2023 to 2025 will be 89.04 billion yuan, 10.296 billion yuan and 11.861 billion yuan respectively, up-21.56%, 15. 63% and 15.20% year-on-year. The net profit of parent company was 22.80 billion yuan, 12.51 billion yuan and 1.428 billion yuan respectively, with a year-on-year growth of 38.13%,-45.13% and 14.15%. The corresponding PE was 10.5x, 19.1x and 16.7x. The target price was 43.05 yuan for 23 years, and the investment rating of Buy-A was maintained.
Risk hints: downstream demand is less than expected risk, raw material prices rise sharply, industry competition intensifies risk; M & An effect is not as good as expected risk.