CICC has released a research report maintaining its profit forecasts for BEAUTYFARM MED (02373) for 2026 and 2027. At the current share price, the stock is trading at 10x and 8x P/E for 2026 and 2027, respectively. The firm reaffirmed its Outperform rating. However, due to a decline in the sector's valuation benchmark, the target price has been reduced by 29% to HK$30, which corresponds to 15x and 12x P/E for 2026 and 2027, suggesting a 54% upside potential. The key points from CICC are as follows:
The company's 2025 results were in line with expectations. BEAUTYFARM MED reported revenue of RMB 3.00 billion, a year-on-year increase of 16.7%. Net profit attributable to shareholders was RMB 320 million, up 39.0% year-on-year. Adjusted net profit reached RMB 380 million, rising 41.0% year-on-year. The performance met both the company's prior guidance and the bank's projections.
Both the beauty & wellness and medical aesthetics businesses achieved high-quality, rapid growth, while the sub-health medical services segment demonstrated strong expansion momentum. In 2025, by business segment: 1) Beauty & Wellness: Revenue was RMB 1.66 billion, increasing 14.9% year-on-year. Customer traffic at directly-operated stores grew 23.2% to 1.72 million visits, and the number of active members rose 11.8% to 146,000. 2) Medical Aesthetics: Revenue reached RMB 1.02 billion, up 9.6% year-on-year, with active members increasing 7.7% to 36,000. 3) Sub-health Medical Services: Revenue was RMB 330 million, surging 62.2% year-on-year, raising its contribution to total revenue to 11%. The number of active members in this segment grew 37.9% to 10,000. The company continued to expand its store network through organic growth and acquisitions. By the end of 2025, it operated 252 directly-owned and 260 franchised beauty & wellness stores, along with 27 medical aesthetics and 11 sub-health medical service outlets.
Optimization of the business structure, economies of scale, and improved operational efficiency led to a year-on-year enhancement in both gross margin and sales expense ratio. The adjusted net profit margin also improved in 2025. The gross margin increased by 2.8 percentage points year-on-year to 49.1%, primarily driven by rental optimization, enhanced procurement bargaining power, the realization of scale economies, and an optimized business mix. The sales expense ratio decreased against the trend by 0.8 percentage points to 17.2%, mainly due to refined operations and efficiency gains. The administrative expense ratio rose by 0.8 percentage points to 15.9%, while the R&D expense ratio remained flat at 1.4%. Consequently, the net profit margin attributable to shareholders and the adjusted net profit margin increased by 1.7 and 2.2 percentage points year-on-year to 10.6% and 12.7%, respectively.
Growth is expected to be driven by both organic initiatives and external expansion, with a positive outlook for the company's "Dual Beauty + Dual Wellness" business model. Looking ahead: 1) Organically, the company will continue to optimize per-store operational efficiency and increase the penetration of value-added services, fostering high-quality and steady internal growth. 2) Regarding external expansion, according to company announcements, the acquisition of Siyanli was completed on January 7, 2026, and will be consolidated starting in 2026. The company plans to apply the integration experience gained from Nairui'er to drive revenue growth and efficiency improvements at Siyanli. The bank is optimistic about the company's potential to further enhance its market pricing power following the "Triple Strong Alliance" and believes it possesses substantial long-term growth prospects driven by its three core strategies: "Super Brand, Super Chain, and Super Digitalization."
Risks include intensifying industry competition, potential medical incident risks, and goodwill impairment risks.
Comments