The company released its 2024 three-quarter report: 24Q3 achieved revenue of 0.35 billion yuan (+1.6% YoY), net profit of 0.046 billion yuan (YoY +9.2%), net profit of 0.037 billion yuan (YoY +6.6%), stable revenue, actual operating expectations were better than revenue (contract liabilities increased by 0.07 billion yuan to 0.14 billion yuan), and profits continued to perform well. 2024H1, the “cold acidulant” brand accounts for 62.9% of the offline retail market share in the anti-sensitivity segment, and occupies a leading position.

Offline: The channel base is consolidated, and the share is steadily increasing. The offline share of 24H1 cold acid alcohol increased to 8.6% (+0.5pct compared to the full year of '23), making it third place in the market (up 1 place from '23). The company firmly implements the product promotion strategy of “improving quality, restructuring, and promoting growth”. Specialized research platforms and medical research platform products continue to be favored by consumers, and sales share has increased rapidly, driving continuous optimization of profitability.

The company uses high-quality distributors distributed in 31 provinces, autonomous regions, municipalities directly under the Central Government and more than 2,000 districts/counties across the country to achieve coverage of hundreds of thousands of retail terminals. Aiming at the broadest county and township markets, the company quickly sank down channel barriers through the distribution model.

Online: Medical research is rapidly distributed, and the product structure is significantly optimized. We expect the company's 24Q3 online channel growth rate to be beautiful, and the medical research series will become the core growth driver, driving a significant increase in gross margin. The company's social content generation, online and offline cross-border integration, achieved ice-breaking promotion and continuous water storage on Douyin and Xiaohongshu, collaborated with leading anchors and multiple star anchors, and also accelerated the launch of new products such as specialized anti-allergic (refreshing white peach) toothpaste, scientific research Olaf children's toothpaste, and medical anti-allergy treatment toothpaste through diversified content upgrades and digital media matrices (up to 2024H1, 1.33 million private domain members).

Gross margin increased significantly, and operating capacity was stable. The 24Q3 company's gross profit margin was 53.9% (YoY +7.0pct, month-on-month +8.6pct), with a net profit margin of 13.0% (YoY +0.9pct, month-on-month +2.8pct), and profitability improved significantly. Sales/management/R&D expense ratios were 33.5%/4.4%/3.8%, respectively (+7.2pct/+0.3pct/-0.1pct), and sales expenses increased. In terms of operating capacity, as of the end of 24Q3, the company's inventory turnover days was 109 days (year-on-year +19 days), accounts receivable turnover days were 8 days (year-on-year - 2 days), and accounts payable turnover days was 71 days (year-on-year - 7 days).

Profit forecast and investment rating: We expect net profit to be 0.16/0.18/0.21 billion yuan in 2024-2026, corresponding PE is 31X, 26X, and 23X respectively, maintaining a “buy” rating.

Risk warning: Industry competition intensifies, new product development falls short of expectations, channel expansion falls short of expectations.