Core Viewpoint - Huaxi Biological has reported a seemingly contradictory financial performance for 2024, with total revenue of 5.371 billion yuan, a year-on-year decline of 11.61%, and a net profit of 174 million yuan, down 70.59%. However, the company increased its R&D investment by 4.46% to a record high of 466 million yuan, representing 8.68% of its revenue, positioning it among the leaders in A-shares [2][10]. Financial Performance - Total revenue for Huaxi Biological in 2024 was 5.371 billion yuan, a decrease of 11.61% year-on-year [2]. - Net profit fell to 174 million yuan, a significant drop of 70.59% [2]. - R&D investment reached 466 million yuan, marking a 4.46% increase and a historical high [2]. - The R&D expense ratio was 8.68%, placing the company at the forefront of the A-share market [2][10]. Business Strategy - The company aims to return to an entrepreneurial organization to awaken its innovative capabilities, as stated by Chairman Zhao Yan [2]. - Huaxi Biological's international revenue from raw materials reached 608 million yuan, a year-on-year increase of 17.65%, supported by FDA certification [5]. - The medical terminal business generated 1.44 billion yuan, a remarkable increase of 32.03%, becoming the largest revenue contributor [6]. - The functional skincare segment saw revenue decline by 31.62% to 2.569 billion yuan due to intensified market competition and channel adjustments [6]. R&D and Innovation - Huaxi Biological has established eight R&D platforms and holds 580 valid patents, with 392 applicable to its main business [7]. - The company is transitioning from a focus on hyaluronic acid to two foundational sciences: glycoscience and cell biology [9]. - The R&D team consists of 920 members, reflecting the company's commitment to long-term investment in innovation [10]. Market Position and Future Outlook - The FDA certification is expected to facilitate Huaxi Biological's expansion into high-end markets in Europe and the United States [4]. - The company is diversifying its business across four major fields: raw materials, medical devices, functional foods, and tissue engineering, creating a "cell-level anti-aging" ecosystem [9]. - Despite short-term profit pressures, Huaxi Biological announced a cash dividend of 52.62 million yuan, accounting for 30.19% of its net profit [9].

Core Viewpoint - The company, Huaxi Biological Technology Co., Ltd., reported a decline in revenue and net profit for the year 2024, prompting inquiries from the Shanghai Stock Exchange regarding its business performance and strategic adjustments [1]. Group 1: Business Performance - In 2024, the company's revenue was 5.371 billion yuan, a year-on-year decrease of 11.61%, with net profit falling to 174 million yuan, down 70.59% [1]. - The decline in revenue was attributed to a drop in functional skincare product sales, increased operating expenses, and asset impairment losses [1]. - The company maintained its R&D investment at 466 million yuan, consistent with the previous year, indicating a focus on strategic innovation and technology-driven brand development [1]. Group 2: Revenue Breakdown - The company reported a significant increase in overseas raw material business revenue, reaching 608 million yuan, with a year-on-year growth of 2.61% domestically and 17.60% internationally [2][3]. - The overseas revenue growth was driven by increased purchases from existing clients and a 13% rise in the number of overseas clients, contributing 48.5 million yuan in revenue [3]. - The company’s brands, Huaxi and Furst, target different market segments, with Furst focusing on cost-effective raw materials while Huaxi aims at high-value end products [3]. Group 3: Medical Terminal Business Growth - The medical terminal business saw a substantial increase, with total revenue reaching 1.44 billion yuan, a 32.03% increase from the previous year [4]. - Skin-related medical products generated 1.073 billion yuan, up 43.57%, with specific products like the micro-crosslinked "Renzhi Doll Needle" seeing over 100% growth [4][5]. - The company has established a comprehensive sales network covering 31 provinces and over 7,000 partner institutions, with direct sales accounting for over 75% of total sales in 2024 [6]. Group 4: Strategic Adjustments - The company is undergoing a third strategic upgrade, focusing on sugar biology and cell biology, leveraging its strengths in synthetic biology and biomanufacturing [12][13]. - The business model is built on three core capabilities: R&D innovation, results conversion, and market transformation, enabling comprehensive service offerings to global enterprises and consumers [13]. - The company aims to enhance its product, channel, organization, and brand strategies to align with its long-term goals in the life sciences sector [12][13].

Investment Rating - The investment rating for the company is "Buy" and is maintained [7]. Core Views - In 2024, the company achieved operating revenue of 5.37 billion yuan, a year-on-year decline of 11.6%, and a net profit attributable to shareholders of 170 million yuan, down 70.6% year-on-year. In Q4 2024, the operating revenue was 1.5 billion yuan, a decrease of 19.3% year-on-year, with a net profit of -190 million yuan [2][4]. - For Q1 2025, the company reported operating revenue of 1.08 billion yuan, a year-on-year decline of 20.8%, and a net profit of 100 million yuan, down 58.1% year-on-year [2][4]. - The company is focusing on overall resource efficiency and is undergoing a phase of adjustment in its skincare business, while the raw material business is growing steadily, and the high-margin medical terminal business is expanding rapidly [9]. Summary by Sections Financial Performance - In 2024, the raw material business generated revenue of 1.24 billion yuan, up 9.5% year-on-year, with international market expansion showing a growth of 17.7%, particularly in the Americas, Europe, and Southeast Asia, where growth exceeded 20% [9]. - The medical terminal business achieved revenue of 1.44 billion yuan, a year-on-year increase of 32%, with skin-related medical products growing by 43.6% [9]. - The functional skincare business reported revenue of 2.57 billion yuan, down 31.6% year-on-year, while the nutritional science business generated 80 million yuan, up 41% year-on-year [9]. Cost and Profitability - The company's gross margin improved by 0.8 percentage points year-on-year, with the raw material, medical terminal, and functional skincare gross margins changing by 0.9, 2.3, and -1.1 percentage points respectively [9]. - The net profit margin decreased by 6.5 percentage points year-on-year due to increased management expenses and changes in the organizational structure [9]. Future Outlook - The company is expected to see improvements in revenue and profit as it continues to adjust its skincare business and launch new products. The raw material business is expected to maintain a strong market position, and the medical beauty business is gradually contributing more to overall performance [9]. - EPS forecasts for 2025-2027 are 0.95, 1.33, and 1.67 yuan per share respectively [9].

Core Viewpoint - Huaxi Biological is undergoing a deep transformation in brand positioning and team philosophy, facing performance pressures while revealing new growth opportunities through foundational scientific research [1] Group 1: Financial Performance - In the 2024 financial report, Huaxi Biological reported a revenue decline of 11.61% to 5.371 billion yuan and a net profit decrease of 70.59% to 174 million yuan [2] - The company is currently in a crisis not solely due to performance decline but due to organizational entropy exceeding acceptable limits, necessitating significant internal restructuring [2] - Management changes, including organizational upgrades and a new compensation system, have incurred costs exceeding 70 million yuan, impacting short-term profits [2] Group 2: Strategic Investments - The company is increasing long-term strategic investments, including supply chain improvements and production efficiency enhancements, with related expenses exceeding 100 million yuan [3] - Continuous investment in forward-looking research and development is being made, focusing on emerging business areas such as regenerative medicine and nutritional science, with strategic innovation investments exceeding 100 million yuan [3] Group 3: Business Line Adjustments - The "Functional Skincare Business" has been rebranded as "Skin Science Innovation Transformation Business," which saw a revenue decline of 31.62% to 2.569 billion yuan, accounting for nearly 50% of main business revenue [4] - The company is restructuring brand positioning and scientific foundations for various brands, emphasizing a focus on scientific validation and team capability adjustments [4] Group 4: Growth Engines - The Nutritional Science Innovation Transformation Business (formerly Functional Food Business) experienced a significant revenue increase of 40.97% [5] - The medical terminal business grew over 30%, generating approximately 1.44 billion yuan, with skin-related medical products revenue reaching 1.073 billion yuan, a 43.57% increase [5] Group 5: Research Focus - Huaxi Biological is concentrating on foundational research in glycoscience and cell biology, aiming to translate scientific innovations into consumer-grade solutions [6][7] - The company has expanded the application of hyaluronic acid into new fields such as tissue engineering and targeted drug delivery, with ongoing research into the signaling mechanisms of glycan substances [9] Group 6: Future Directions - The company is committed to exploring aging intervention and regenerative medicine, with a focus on developing animal-free, serum-free cell culture media expected to launch in the second half of the year [16] - Huaxi Biological plans to leverage its research capabilities to create customized skincare products, with over 108 customization options validated scientifically [15]