Event: In 2024, the company will achieve operating income of 5.371 billion yuan (YOY-11.61%), net profit attributable to the parent company of 174 million yuan (YOY-70.59%), and non-net profit attributable to the parent company of 107 million yuan (YOY-78.13%). The main reasons for the pressure on the company's operating results include: 1) the company's management reform of the organizational structure upgrade, salary system reform, consulting company expenses and equity incentive expenses of more than 70 million yuan; 2) The cost of promoting the transformation of the supply chain and the layout of the production capacity increased by more than 100 million yuan; 3) More than 100 million yuan has been invested in strategic innovation businesses such as regenerative medicine and nutritional science innovation and transformation business; 4) A large impairment provision of approximately RMB189 million was made for asset impairment; 5) Consumer goods-related businesses, which account for a high proportion of revenue, continue to adjust.

The raw material/medical terminal business increased steadily by 9.47%/32.03% year-on-year, and the skin science innovation and transformation business was under pressure.

In 2024, from the perspective of business segments:

1) Raw material business: the revenue was 1.236 billion yuan (YOY+9.47%), of which the revenue of raw materials in the international market was 608 million yuan (YOY+17.65%), and the sales revenue in the Americas, Europe, Southeast Asia and other places increased by more than 20% year-on-year.

In terms of gross profit margin, the overall gross profit margin of the raw material business (excluding Place) was 65.57%, a year-on-year increase of +0.86pcts, and the gross profit margin of pharmaceutical-grade hyaluronic acid raw materials was 87.56%. The company's raw material products continue to be enriched, and in 2024, 96 raw material and synthetic biology R&D projects will be carried out, and 10 new products of bioactive raw materials will be launched.

2) Medical terminal business: achieved revenue of 1.440 billion yuan (YOY+32.03%), gross profit margin +2.27pcts year-on-year to 84.37%, the transformation of medical aesthetic business has achieved remarkable results, operational capacity has been improved, and the expense ratio has decreased steadily. The revenue of dermatological medical products was 1.073 billion yuan (YOY+43.57%), and the number of medical aesthetic institutions covered by the company was 7,000, an increase of 30%+ year-on-year. Among them, the revenue of the differentiated and advantageous category micro-cross-linked Runzhi doll needle increased by 100%+ year-on-year, covering more than 5,000 institutions; Adhere to the family combination application of products, the revenue of Runzhi fillers increased by 30%+, covering more than 3,000 institutions, and in October 2024, the new products "Runzhi Gege" and "Runzhi Feiran" will be released, focusing on the neck anti-aging and lip beauty markets respectively, and a number of new cross-linking technology products have entered the clinical or registration stage, and more products suitable for high-value parts such as the back of the nose, chin, temporal, and eye area will be launched in the next 1-2 years. The company's two hyaluronic acid class III medical device water and light products have completed clinical trials and entered the registration review stage, and are expected to obtain registration certificates in the first half of 2025, which is expected to become the first batch of water and light indication products to be listed in compliance.

3) Skin science innovation and transformation business: achieved revenue of 2.569 billion yuan (YOY-31.62%), and gross profit margin -1.13pcts year-on-year to 72.80%. Focusing on the repair track, the barrier repair series has accounted for more than 50% of the brand's overall revenue, and has launched firming and plumping sub-polishing and firming creams to strengthen the competitiveness of its product portfolio. Quadi has created a cell-level precision anti-aging brand and launched the CT50 super elastic series (including ultra-elastic cream, essence water emulsion, etc.). Focusing on oily skin people, BM Muscle Active launched oily essence and acne cream on the basis of the brown rice series version 2.0 to build a "comprehensive solution for oily skin metabolism balance". The brand positioning of Mirepair was upgraded to "a damaged skin care brand focusing on skin neuroimmunology", and the "Blue Bandage" product line (including masks, serums, creams, PROs, etc.) was improved.

4) Nutritional science innovation and transformation business: achieved revenue of 82 million yuan (YOY+40.97%), focusing on the four core directions of "nutrition and immunity, nutrition and metabolism, nutrition and anti-aging, nutrition and mood".

Profit forecasts and investment recommendations. The company is positioned as a platform enterprise of biotechnology materials, and with the gradual advancement of management reform, the diversified business segment is expected to grow steadily in the future. Considering that the company's performance is affected by factors such as management changes, increased strategic investment, and asset impairment, and combined with the performance of the annual report, we adjust the company's revenue from 2025 to 2027 to be 58.5/65.2/7.39 billion yuan, an increase of 8.9%/11.5%/13.3% year-on-year, and the net profit attributable to the parent company is 4.7/6.2/780 million yuan respectively, an increase of 169.2%/33.0%/24.7% year-on-year, and the current market value corresponds to 49 times PE in 2025. Maintain "Buy" rating.

Risk warning: intensified competition in the industry; The promotion of new products is not as expected; Regulatory policy risk.