Soochow: First Beauty Farm MED (02373) is rated as "buy", double beauty plus double health ecological formation.

Soochow released a research report stating that it is covering BEAUTYFARM MED (02373) for the first time and giving it a "Buy" rating. As a leading target in China's beauty and health management services industry, the company's unique "double beauty + double health care" ecological model, proven merger integration capabilities, and excellent operational efficiency are expected to continue leading the industry and achieve exponential growth. Key points from Soochow are as follows: Leading high-end beauty industry with a comprehensive "double beauty + double health care" ecological layout Founded in 1993, the company started with lifestyle beauty business and has now established a one-stop beauty and health management service system covering traditional beauty, medical beauty, and sub-healthy assessment interventions. It owns four major brands: Meilitianyuan, Belliss, Xiuker, and Yanyuan, and further consolidates its industry position through the acquisitions of Nairier and Si Yanli, forming a synergistic ecological closed loop of "lifestyle beauty + medical beauty + traditional health care + sub-healthy medical care." Continuous growth in performance, steady improvement in profitability The company has shown strong growth resilience, with revenue increasing from 15.03 billion yuan in 2020 to 25.72 billion yuan in 2024, with a compound annual growth rate of 11.3%. Accelerated growth in the first half of 2025, achieving revenue of 14.59 billion yuan, a year-on-year increase of 28.2%. Profitability has also improved, with net profit attributable to shareholders increasing from 1.51 billion yuan in 2020 to 2.28 billion yuan in 2024; in the first half of 2025, net profit attributable to shareholders reached 1.56 billion yuan, with a year-on-year growth rate of 34.9%. Gross profit margin has steadily increased to 49.33% in 2025H1, and net profit margin has also improved to 10.67%, reflecting the company's good cost control and structural optimization resulting from the increase in the proportion of high gross profit businesses. At the same time, the company announced that the dividend ratio for the next three years will not be less than 50% of net profit attributable to shareholders, demonstrating excellent dividend levels. Industry-wise, multiple tracks release long-term growth dividends, and the company's multiple-location layout facilitates growth relay From the perspective of the traditional beauty, light medical beauty, and sub-healthy industries where the company is currently located, the overall market size for these three sectors is expected to continue expanding. According to Frost & Sullivan estimates, by 2030, the market sizes for traditional beauty, light medical beauty, and sub-health are expected to reach 640.2 billion yuan, 415.7 billion yuan, and 29 billion yuan, respectively. As younger consumers increasingly focus on standardized services and more stable experiences, the advantages of large enterprise leaders are significant, and concentration is expected to further increase. The consumer groups of traditional beauty and light medical beauty overlap extensively, with institutionalization leading to mutual customer inflow, higher conversion rates for store visitors, and the company in traditional beauty business obtaining superior competitive advantages through mergers and acquisitions of leading brands and providing benchmark services. The sub-healthy business continues to improve storefronts and popular services, meeting the current needs of young people. Significant business synergy, dual-drive of endogenous and exogenous expansion The company's core business model has strong synergies: using the broad and highly trusted lifestyle beauty business as the front-end traffic entry, efficiently converting to high-value, high-stickiness medical beauty and sub-healthy services, the cross-business conversion rate reached 28.7% in 2024. In terms of endogenous growth, the company rapidly expanded its store network through the strategy of "establishing benchmarks for direct operation and expanding coverage through franchising," with a total of 554 stores by the end of 2024. Exogenous expansion capabilities are outstanding, with the company's mature target selection system and post-investment digital integration capabilities leading to a significant short-term increase in net profit margin after acquiring "Nayier," demonstrating the company's strong integration capabilities, providing a replicable model for future industry consolidation. Risk factors Domestic consumption market recovery is slower than expected, industry competition intensifies, and risks of merger integration, etc.