CICC: Maintains BEAUTYFARM MED (02373) Outperform Rating, Lowers Target Price to 30 Hong Kong Dollars.

CICC released a research report stating that it maintains BEAUTYFARM MED (02373) earnings forecast for 2026-2027, with the current stock price corresponding to a 10/8x P/E ratio for 2026-2027. It maintains an outperform industry rating, based on the downward shift in sector valuation, lowering the target price by 29% to HK$30, corresponding to a 15/12x P/E for 2026-2027, with 54% upside potential. Key points from CICC: 2025 performance meets expectations The company announced its 2025 performance: revenue of 3.0 billion yuan, a year-on-year increase of 16.7%; net profit attributable to the parent of 320 million yuan, a year-on-year increase of 39.0%; adjusted net profit of 380 million yuan, a year-on-year increase of 41.0%. The performance is in line with the previous performance forecast and the bank's expectations. High-quality growth in beauty and medical beauty business, strong momentum in sub-health medical services In 2025, in terms of business segments, Beauty and health: revenue of 1.66 billion yuan, a 14.9% increase, same-store customer traffic increased by 23.2% to 1.72 million, active members increased by 11.8% to 146,000; Medical beauty: revenue of 1.02 billion yuan, a 9.6% increase, active members increased by 7.7% to 36,000; Sub-health medical services: revenue of 330 million yuan, a 62.2% increase, accounting for 11% of revenue, active members increased by 37.9% to 10,000. The company continues to expand its store layout through organic and inorganic means, with a total of 252/260 beauty and health direct/ franchise stores, and 27/11 medical beauty and sub-health stores as of the end of 2025. Optimization of business structure, economies of scale, and operational efficiency driving the improvement in gross margin and sales expense ratio on a year-on-year basis, leading to an increase in adjusted net profit margin In 2025, gross margin increased year-on-year by 2.8 percentage points to 49.1%, mainly due to rental optimization, improved procurement negotiation capability, economies of scale, and business structure optimization. Sales expense ratio decreased against the trend by 0.8 percentage points to 17.2%, mainly due to operational efficiency improvements; management expense ratio increased year-on-year by 0.8 percentage points to 15.9%; research and development expense ratio remained the same at 1.4%. In the end, net profit/ adjusted net profit margin increased year-on-year by 1.7/2.2 percentage points to 10.6%/12.7%. Driven by organic and inorganic growth, optimistic about the growth prospects of the "double beauty + double health" business model Looking ahead: Internally, the company continues to optimize single-store operational efficiency, increase the penetration rate of value-added services, and drive high-quality and steady growth internally; Externally, according to the company's announcement, Siyanli has completed delivery on January 7, 2026, and will be consolidated in 2026, leveraging the integration experience of Nerium to enhance its revenue and operational efficiency. The bank is optimistic about the company's further strengthening of market bargaining power under the "Triple Strong Alliance" strategy, and sees broad long-term growth potential under the three major strategic drivers of "super brand, super chain, super digitalization". Risk warning: Intensifying industry competition; medical accident risks; goodwill impairment risks.