Key points of investment
Results during the 2023 adjustment period are under pressure, and 2024Q1 is recovering positively. In 2023, the company achieved revenue of 6.08 billion yuan (-4.45%, same below), net profit of 590 million yuan (-39.0%), net profit of non-return to mother of 490 million yuan (-42.4%), of which 2023Q4 achieved revenue of 1.85 billion yuan (-9.0%), net profit to mother of 80 million yuan (-73.4%), net profit of non-return to mother of 60 million yuan (-77.1%). The company plans to pay a cash dividend of 3.8 yuan for every 10 shares, with a dividend rate of 48.6%. 2024Q1 achieved revenue of 1.36 billion yuan (+4.2%), net profit attributable to mother of 240 million yuan (+21.4%), and net profit of non-return to mother of 230 million yuan (+53.3%).
The cosmetics business was adjusted in stages, and large single products continued to be created. The cosmetics sector achieved revenue of 3.76 billion yuan (-18.5%) in 2023, accounting for 61.8% of main revenue. The company continues to actively carry out strategic adjustments. The product side optimizes the category system with large single products as the core, and adjusts the channel structure and increases the proportion of self-operated channels. Major brands are gradually developing differentiated management strategies, and Runbaiyan's single product line barrier repair series accounts for 40% of Runbaiyan's overall sales revenue; Quadi launched a large single product, Quadi Jinyun, which focuses on the differentiation of the core categories of the anti-aging circuit.
The medical terminal business is growing rapidly, and raw materials are growing steadily. In 2023, the company's raw materials/medical terminal business achieved revenue of 11.3/1.09 billion yuan respectively, accounting for 18.6%/18.0% of the company's main business revenue, +15.2%/+59.0%, respectively. ① Raw materials: By region, the domestic and international markets are growing, with the international market growing at a good rate (+21.5%); by product, pharmaceutical-grade non-hyaluronic acid raw materials with high gross margin and stability are growing faster (+19.0%); the company's sterile HA production line has completed trial production, further consolidating the company's leading position in the HA high-end market. ② Medical terminals: Thanks to the differentiated advantages of medical and aesthetic medicine and the perfect portfolio of layered anti-aging products, the medical terminal business grew rapidly, with revenue from dermatological medical products reaching 750 million yuan (+60.3%).
24Q1 profitability improved, and the cost ratio for the period was greatly optimized. ① Profitability: In 2023, the company's gross margin/net margin was 73.3%/9.8%, respectively, -3.7 pct/-5.5 pct, respectively. The decrease in gross margin was mainly due to the gross margin of raw material products -6.8 pct year on year (increase in production costs). 2024Q1's gross margin/net margin was 75.7%/17.9%, respectively, +2.0pct/+2.5pct year-on-year, respectively, improving profitability. ② Period expense ratio: The company's expense ratio for the 2023 period was 61.7%, +2.3 pct year over year. Among them, sales/management/R&D/finance expenses rates were -1.2/+1.9/+1.2/+0.3 pct year over year, respectively, and management & R&D expenses increased slightly. The cost rate during 2024Q1 was 51.3%, -7.6pct year over year, mainly due to significant optimization of the sales expense ratio (-10.4pct year over year).
Profit forecast and investment rating: Huaxi Biotech is the global leader in the hyaluronic acid industry, and the “four-wheel drive” integration advantage is stable. Considering the strategic adjustment and growth rate of the skincare sector, we lowered the company's 2024-25 net profit of 9.9/1.17 billion yuan to 7.3/85 billion yuan, and added the 2026 net profit forecast of 1.01 billion yuan, +23%/+16%/+19% year-on-year, respectively. The current market value corresponds to 2024-26 PE of 40/34/29X, maintaining a “buy” rating.
Risk warning: Industry competition intensifies, new product promotion falls short of expectations, etc.