The company released a performance forecast, and the net profit to be returned to mother is expected to be between 680 million and 80 million yuan in 2023. The company issued a performance forecast:
1) Revenue: Revenue is expected to be 80.6 to 8.26 billion yuan in 2023, a year-on-year decline of 29% to 27%. 2) Performance: Net profit for 2023 is expected to be 68-80 million yuan, down 59% to 52% year on year; net profit without return to mother is estimated to be 51-60 million yuan, down 67% to 62% year on year. Net profit attributable to mother was lower than expected mainly due to: ① Considering changes in the real estate market, the steady industrial park renewal and renovation project was suspended, and the company recovered the confirmed asset disposal proceeds in 2023Q3, with a total net profit of 1.36 billion yuan. ② In 2023, the company disposed of stocks of infection protection products and related equipment, reducing profits by about 250 million yuan.
The revenue of medical consumables is estimated at 38.5 to 3.95 billion yuan in 2023, a year-on-year decrease of 48% to 46%. 1) By product: ① Revenue from conventional medical consumables increased steadily by 16% to 18%, and sales of core products such as surgical kits and film applications grew rapidly. ② Since 2023Q2 for infection protection products, terminal demand has weakened and industry inventories are high. The company's sales of related products declined sharply in 2023 (a year-on-year decrease of 3.8 billion yuan), which dragged down business revenue performance. 2) By channel: The distribution of the company's sales channels is balanced. Domestic B-side (domestic hospitals and others) /foreign sales/C-side sales (e-commerce + pharmacy) sales accounted for 38%/35%/26% in 2023Q1 to Q3. Medium- and long-term channel penetration and extended mergers and acquisitions co-built and grew: ① The reputation of our own Winner brand continued to increase. At the end of 2023, it covered more than 6,000 domestic hospitals and broke through 190,000 OTC pharmacies. The e-commerce channel developed steadily. ② In 2022, the company acquired Longtai Medical, Ping An Medical Equipment, Guilin Latex, and collaborated to build a one-stop medical consumables platform with products, channels and brands.
The revenue of the consumer goods business is expected to be 42.1 to 4.31 billion yuan in 2023, a steady increase of 5% to 8% over the same period last year. The company's return to value, explosion strategies, and cost reduction and fee control measures have been effective, and the gross margin of the consumer goods business increased by more than 3 pcts in 2023.
1) Product aspect: The company focuses on three scenarios, optimizes the product structure while continuing product innovation and launching popular SKUs. We judge that the retail efficiency of products has been effectively improved. 2) Channel aspect: The company actively expands channels such as offline stores, instant retail, and e-commerce platforms. At the end of 2023, the number of offline stores reached 411 (84 new stores opened compared to the beginning of the year, including 42 direct-run stores and 42 franchised stores), and the floor efficiency increased by about 15%. Considering the steady, moderate and positive consumption environment, we judge that the profits of franchise stores are currently climbing well based on consumer environment trends, and it is expected that offline stores will continue to expand rapidly in 2024 as a whole. 3) With the joint support of channel expansion and product optimization, the number of members in the cotton era worldwide at the end of 2023 exceeded 52.42 million (16% increase over the previous year).
The company's accounting is handled carefully, and operating risks can be released early. We judged the company's accounting to be careful and dispose of infection protection product inventory and related equipment scrapping in 2023 (reducing profits by about 250 million yuan). The number of inventory turnover days in 2023Q1-Q3 was +18.4 days to 136.3 days year on year, and further improvements are expected in the future. In terms of cash flow, the company's net operating cash flow for 2023Q1-Q3 was 220 million yuan (1.21 billion yuan for the same period in 2022). The sharp year-on-year decline was mainly due to a decrease in advance customer payments and higher payments for the previous year's taxes and purchases in the current period.
The plan is to repurchase shares and the directors and supervisors will increase their holdings, demonstrating confidence in medium- to long-term performance. 1) The company's performance declined due to the high base of the medical consumables business in 2023, accrued impairment losses, etc.; it is expected to resume a healthy growth trend in 2024, and we judge that revenue from both the medical and consumer sectors is expected to grow steadily. 2) According to the company's announcement, it plans to use 100 to 200 million yuan of its own capital to repurchase shares, and directors and supervisors are expected to increase their holdings by 315 to 6.3 million yuan, demonstrating confidence in medium- to long-term performance development.
Investment advice. The company is a leading enterprise on the big health circuit, and the medical and consumer sectors are developing collaboratively. Considering the current suspension of the steady industrial park renewal and renovation project, we have adjusted our profit forecast. We expect net profit to be 7.39/11.09/1.02 billion yuan from 2023 to 2025, respectively, corresponding 18 times PE in 2024, maintaining the “buy” rating.
Risk warning: downstream consumer demand fluctuates; risk of increased competition in the domestic market; risk of category and store expansion; overseas business falls short of expectations.