According to a research report, BEAUTYFARM MED (02373) stands as a leading enterprise in China's lifestyle beauty and medical aesthetics services sector, with strong brand reputation and outstanding operational capabilities. With deepening digital transformation, improved industrial chain layout, and advancing store expansion, performance growth is expected. The firm projects BEAUTYFARM MED's net profit attributable to shareholders for 2025-2027 to be RMB 313 million, RMB 355 million, and RMB 407 million respectively, corresponding to P/E ratios of 25.0x, 22.1x, and 19.2x at current stock price. Considering the company's three-year profit compound growth rate (21%) and comparable company valuations, plus expectations for future M&A-driven external growth, a 30x P/E ratio for 2025 is applied, corresponding to a target price of HK$43.56, maintaining "Strong Buy" rating.
Key observations include:
Performance Overview: H1 2025 revenue reached RMB 1.46 billion (+28% YoY), net profit attributable to shareholders RMB 160 million (+35%), adjusted net profit RMB 190 million (+38%). Nairuier contributed RMB 280 million in revenue, with adjusted net profit margin improving from 6.5% pre-acquisition to 10.4%. The company increased its stake by 20% to 90% in May this year.
Profitability: Gross margin reached 49.3% (+2pp YoY), net margin 11.7% (+0.6pp YoY), with sales/administrative/R&D expense ratios at 17.2%/16.2%/1.4% respectively (+0.6pp/+0.4pp/+0pp YoY). Despite intense industry competition, gross margin remained resilient and strong, attributed to: ①Scale effects (store expansion and customer flow growth reducing procurement and operational costs); ②Improved service efficiency and increased proportion of high value-added products; ③Strengthened brand power maintaining solid product premium capabilities.
Business Breakdown: 55% beauty services (51% directly-operated stores + 5% franchised) + 34% medical aesthetics + 11% sub-health services, creating a diversified revenue matrix. 1) Beauty services: Revenue RMB 810 million (+30%), gross margin 42.1% (+2pp). Directly-operated stores generated RMB 740 million (+31%) with gross margin 40.7% (+2pp); franchised stores contributed RMB 70 million (+16%) with gross margin 56.4% (+1pp). 2) Medical aesthetics: Revenue RMB 500 million (+13%), gross margin 56.9% (+2pp). 3) Sub-health services: Revenue RMB 150 million (+108%), gross margin 63.1% (+9pp).
Operational Data: Brand influence continues expanding with steady growth in store and membership numbers. Store count: 1) Beauty services: 238 directly-operated stores (-1 from end-2024), membership +46% to 112,000; 276 franchised stores (unchanged), membership +70% to 53,000; 2) Medical aesthetics: 27 stores (-1); 3) Sub-health services: 11 stores (unchanged).
Advancing Digital Transformation and Industrial Chain Extension to Enhance Long-term Competitiveness: BEAUTYFARM MED accelerates digital infrastructure development, building comprehensive digital capabilities for online customers, online business, and online organization, improving operational efficiency and customer service experience while comprehensively empowering core competitiveness. Simultaneously, the company invests in upstream supply chain and related enterprises to ensure stable supply and cost advantages for core products and consumables, establishing a solid foundation for long-term business development.
Stable Core Team with Orderly Service Innovation and Store Expansion: The company maintains a stable core management and technical team, providing strong support for enterprise development. In service innovation, it continuously launches new beauty, medical aesthetics, and sub-health conditioning programs to meet diverse consumer demands. For store expansion, it focuses on densifying layout in first and second-tier cities to expand market coverage.
Risk Factors: Intensified market competition, slower-than-expected new product expansion, weaker-than-expected consumption environment, among others.