Incident: The company released its 2024 quarterly report, achieving revenue of 890 million yuan, yoy -30%, net profit to mother of 59 million yuan, yoy -54.4%, net profit deducted from non-return mother of 52 million yuan, yoy +242.5%.

Financial highlights:

1) Cosmetics: Focus on Yi Lian+Dr. Eir, with steady performance

Cosmetics revenue was 544 million yuan, up 15.12% year on year, and gross profit margin was 62.19%. By brand, Yilian achieved revenue of 200 million yuan, an increase of 17.45% year on year, and Dr. Aier achieved revenue of 294 million yuan, an increase of 20.63% year on year.

Yilian's focus on the “China High Moisture” topic broke through circles, using the China High Moisture Retention Event in Harbin and the Yilian Qianfoshan Lunar New Year Garden Tour, etc.; Dr. Aier's Flash Charge series was fully upgraded, the Shake Up Series expanded the categories, and held a press conference on the flash lotion upgrade to raise the brand's volume. Furthermore, on the R&D side, the company is developing 88 new products and 8 newly authorized patents (including 4 inventions), and is actively promoting the expansion of sunscreen and care categories.

2) Pharmaceuticals & raw materials and additives achieved revenue of 1.1/84 billion yuan, yoy -23.25%/+10.26% respectively.

Investment suggestions: In the long run, using business transformation as an opportunity, the company's “1234” innovation strategy shows resilience in sustainable development: ① The cosmetics “5+N” brand strategy establishes multi-brand matrix barriers, consolidates core popular products & optimizes channel layout; ② Medical and aesthetic: launching a new brand, Ke Mi, will focus on light medical and aesthetic surgery periods to create a second growth curve; ③ Pharmaceuticals & Ingredients: Integrate pharmaceutical resources to create a specialized field package and continue to expand sales channels; raw materials promote domestic and foreign API registration projects while actively developing new raw materials & raw materials collaboration. I am optimistic that the company will continue to focus and develop to become a leading comprehensive operator in the big health industry! The net profit for 24-26 is estimated to be 3.7/47/550 million yuan, corresponding to 22/17/15xPE, maintaining the “buy” rating.

Risk warning: risk of macroeconomic fluctuations, risk of falling short of expectations, risk of increased market competition, industry policy risk