Description of the event
On March 25, Giant Biotech released the 2023 results announcement. In 2023, it achieved operating revenue of 3,524 billion yuan, an increase of 49.0%; realized net profit of 1,452 billion yuan, an increase of 44.9%; and achieved adjusted net profit of 1,469 billion yuan, an increase of 39.0% year on year.
Medical dressing brands have a mature mentality, and core products continue to be sold
The two major products are “two-wheel drive”. The core single product contributed to the increase in performance. Looking at the company's performance by brand, Kefumei achieved revenue of 2,788 billion yuan, a year-on-year increase of 72.9%, accounting for 79.1% of total revenue in 23.
As the company's core brand, Kefumei went from device to makeup. With online marketing combined with offline professional theatre+mechanical design/dermatologist endorsement, the new Kefumei collagen stick continued the trend of 618 growth (GMV increased 700% + year over year) in Double 11. GMV increased 200% + year over year, achieving a successful iteration from collagen dressings to collagen stick products. At the same time, during the reporting period, Juzi Biotech launched a variety of new products, such as Kefumei Collagen Milk, Kefumei Zipao, etc., which all received positive feedback from the market on various e-commerce platforms, once again proving the company's strong brand strength and helping the Kefumei brand continue to grow.
Clikin achieved revenue of 617 million yuan, which is basically the same as in '22, accounting for 17.5% of total revenue in 2023. The Creigin series provides comprehensive solutions for facial anti-aging. Many new products meet the differentiated needs of customers, and is expected to enter a growth period in the future. The company's two major brands, Kefumei and Colijin, accounted for more than 96% of the company's overall business in 23, and the “two-wheel drive” pull-down performance continued to improve. It is expected that the recovery in consumption will drive an increase in demand for beauty and skincare products this year. With the company's brand and channel advantages and the advance layout of production capacity, the company's performance is expected to reach a new high.
Taking the lead in formulating raw material standards, leading recombinant proteins into “standardization”, Giants takes the lead in formulating a number of recombinant collagen industry standards. Under healthy competition in the industry, Giazi Biotech is expected to benefit. The three group standards “Raw Materials for Recombinant Collagen for Cosmetics”, “Method for Determining Collagen Secretion by Recombinant Collagen to Promote Collagen Secretion in Human Cells”, and “Method for Determining Transdermal Absorption of Recombinant Collagen”, developed by Giant Biotech, were officially implemented in '23. From the customer's point of view, clear standard reference values reduce the difficulty for customers to select product quality, thereby reducing the cost of market education for enterprises. From a company perspective, industry standardization provides a healthy market competitive environment for recombinant collagen, and leading companies are expected to benefit from high authority, strong R&D capabilities, excellent production capacity, and a deeper understanding of the industry.
The launch of injectable products is imminent, and breakthroughs in the three-helix feature are expected to accelerate the injection substitution process. The company plans to obtain two types of three medical device certificates in mid-2024 and the first half of 2025. The company's device brand products include liquid formulations, solid preparations, non-crosslinked gel products and crosslinked gel products, which can meet the needs of different parts and indications. Due to technical barriers and the high time cost of applying for medical devices, most enterprises have limited large-scale production capacity, so there is a technical dividend window for a certain period of time for recombinant collagen. The multi-level layout of the company's medical and aesthetic channels, plus the company's leading position in high-authority raw materials, is expected to achieve a rapid breakthrough in the injection product market and open up a new business growth pole for the company. Furthermore, according to March 13, Giant Biotech continues to be the first to break through 3 types of recombinant collagen with triple helix characteristics globally, which is expected to accelerate the process of replacing hyaluronic acid with stronger mechanical support and longer lasting fillers in the medical and aesthetic field.
Investment advice
As a leader in recombinant collagen, the company's performance is expected to continue to increase due to its diversified product matrix and channel advantages. According to the company's 2023 annual report, we adjusted the company's performance forecast. The company's net profit for 2024-2026 is expected to be 19.22 billion yuan, 24.21 billion yuan, and 3,016 billion yuan, respectively, with year-on-year growth rates of 32%, 26%, and 25% (the value before 2024-2025 was 17.29 billion yuan and 2,095 billion yuan).
Corresponding PE is 19, 15, and 12 times, respectively. Maintain a “buy” rating.
Risk warning
(1) Project commissioning progress falls short of expectations;
(2) R&D investment falls short of expected results;
(3) Recombinant collagen penetration falls short of expectations;
(4) Industry competition heightens risks.