Soochow Securities released a research report initiating coverage on BEAUTYFARM MED (02373) with a "Buy" rating. The report positions the company as a rare leader in China's beauty and wellness management services industry. Its unique "Dual Beauty + Dual Wellness" ecosystem model, proven M&A integration capabilities, and exceptional operational efficiency are expected to enable it to maintain industry leadership and achieve leapfrog growth. The main points from Soochow Securities are as follows:
A leading premium beauty enterprise, BEAUTYFARM MED has established a comprehensive "Dual Beauty + Dual Wellness" ecosystem layout. Founded in 1993 and starting with lifestyle beauty services, the company has built a one-stop beauty and health management service system covering traditional beauty, medical beauty, and sub-health assessment and intervention. It operates four major brands: BEAUTYFARM, BÉLISE, SÉCUR, and YANYUAN. Through acquisitions such as Nairui'er and SIYANLI, it has further solidified its industry position, creating a synergistic closed-loop ecosystem integrating "lifestyle beauty + medical beauty + traditional wellness + sub-healthcare."
The company demonstrates robust growth resilience, with revenue increasing from RMB 1.503 billion in 2020 to RMB 2.572 billion in 2024, achieving a compound annual growth rate (CAGR) of 11.3%. Growth accelerated in the first half of 2025, with revenue reaching RMB 1.459 billion, a significant year-on-year increase of 28.2%. Profitability improved concurrently, as net profit attributable to owners rose from RMB 151 million in 2020 to RMB 228 million in 2024. In H1 2025, net profit attributable to owners reached RMB 156 million, surging 34.9% year-on-year. The gross profit margin remained stable with an upward trend, improving to 49.33% in H1 2025, while the net profit margin also optimized to 10.67%, reflecting effective cost control and an improved business mix with a higher proportion of high-margin services. Furthermore, the company announced a dividend payout ratio of no less than 50% of net profit attributable to owners for the next three years, indicating an excellent dividend policy.
From an industry perspective, multiple sectors offer long-term growth dividends, and the company's diversified layout positions it for sequential growth. Looking at the traditional lifestyle beauty, light medical aesthetics, and sub-health industries where the company operates, the overall market size for each is continuously expanding. According to Frost & Sullivan estimates, these markets are projected to reach RMB 640.2 billion, RMB 415.7 billion, and RMB 29 billion, respectively, by 2030. As younger consumers increasingly prioritize service standardization and stable experiences, leading large enterprises hold significant advantages, and industry concentration is expected to increase further. The consumer bases for lifestyle beauty and light medical aesthetics overlap considerably. Corporate chains effectively cross-promote services, leading to higher conversion rates for in-store clientele. By acquiring secondary and tertiary leaders in the traditional lifestyle beauty sector and providing benchmark services, the company further enhances its competitive edge. Its sub-health business is continuously refining its clinics and popular services to align with the demands of contemporary youth.
The company's core business model exhibits significant synergistic effects. It utilizes its extensive and highly trusted lifestyle beauty services as a front-end traffic gateway, enabling efficient conversion to high-average-spend, high-stickiness medical aesthetics and sub-health services. The cross-business conversion rate improved to 28.7% in 2024. Regarding organic growth, the company rapidly expands its store network through a "company-owned stores set benchmarks, franchised stores expand coverage" strategy, reaching a total of 554 stores by the end of 2024. Its capability for external expansion is outstanding, supported by a mature target screening system and post-investment digital integration capabilities. Following the acquisition of "Nairui'er," its net profit margin improved significantly within a short period, validating the company's strong integration and value-creation capabilities and providing a replicable model for future industry consolidation.
Risk factors include a slower-than-expected recovery in the domestic consumer market, intensifying industry competition, and risks associated with mergers and acquisitions integration.
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