Bloomage Biotechnology Corp. (.SS)_ First take_ 3Q24 NI miss on weaker sales of both skincare and medical device

Summary of Bloomage Biotechnology Corp. (688363.SS) 3Q24 Earnings Call Company Overview - Company: Bloomage Biotechnology Corp. (688363.SS) - Industry: Biotechnology, specifically focusing on skincare and medical devices Key Financial Highlights - 3Q24 Net Profit: Declined by 77% year-over-year (yoy) to RMB 20.3 million, missing consensus estimates by 80% and 84% [2][16] - 3Q24 Sales: Fell by 7.1% yoy to RMB 1,064 million, which was 12% lower than Goldman Sachs estimates [8][9] - Operating Profit: Decreased by 80.9% yoy to RMB 14 million, significantly below estimates [8][15] - Gross Margin: Increased by 1.2 percentage points yoy to 72.4%, but was slightly below estimates [12] Segment Performance - Functional Skincare: Contributed approximately 36% to revenue, declining by 22% yoy [11] - Medical Devices: Contributed about 28% to revenue, showing a growth of 10% yoy, primarily driven by medical aesthetics [11] - Raw Materials: Also contributed around 28% to revenue, with a slight decline of 2% yoy [11] Management Insights 1. Recovery Outlook: Management expects improvement in the skincare business starting from 4Q24, attributing 3Q24's weakness to ongoing transformation efforts [4] 2. New Product Launches: Two key products for the Double 11 shopping festival were introduced: Biohyalux Facial Cream and QuadHA Skin Dynamic Youth Cream [4][22] 3. Medical Aesthetics: Management targets RMB 400-500 million in sales from a new injectable HA filler for neck wrinkles within 1-3 years [4][21] 4. Raw Materials Growth: The company aims for over RMB 100 million in sales from sterile-grade HA and ergothioneine within three years [4][20] Cost Management - Selling Expenses: Decreased by 13% yoy to RMB 452 million, with a selling expenses to sales ratio declining by 3.1 percentage points [13] - Administrative Expenses: Increased by 55% yoy to RMB 176 million, primarily due to one-off restructuring costs [14] - R&D Expenses: Rose by 25% yoy to RMB 113 million, reflecting increased investment in innovation [14] Market Position and Risks - Market Performance: Despite a recent positive trend in gross merchandise value (GMV) during the Double 11 period, Bloomage ranked last among local brands, indicating challenges in achieving a turnaround [5] - Investment Rating: Goldman Sachs maintains a "Sell" rating on Bloomage with a target price of RMB 50, reflecting concerns over the company's recovery trajectory [23][25] Conclusion Bloomage Biotechnology Corp. is currently facing significant challenges in its functional skincare segment, with a notable decline in sales and profits. However, management is optimistic about future recovery driven by strategic transformations and new product launches. The company is also focusing on cost management to improve profitability. Investors should remain cautious due to the ongoing risks and the company's current market position.