CICC: Maintains BEAUTYFARM MED (02373) outperform rating, raises target price to HK$42.

CICC released a research report stating that it maintains the profit forecast for BEAUTYFARM MED (02373) for the years 2025-2026, with the current stock price corresponding to a P/E ratio of 25-26x. It maintains an outperform rating on the industry, based on the company's leading position further strengthening. The target price has been raised by 5% to HK$42, corresponding to a P/E ratio of 31-27x for 2025-2026, with a 25% upside potential. Key Points from CICC: Company Update The company announced on October 15th that it plans to strategically acquire 100% of the equity of SYL with a total consideration of HK$1.25 billion. The transaction valuation is at 14.8x P/E (LTM), with consideration consisting of HK$330 million in cash, HK$510 million in M&A loans, and HK$410 million in share payment. The company will issue and distribute 1,579.8 shares of consideration shares to the seller, SYL Holding, at a price of HK$28.71 per share, accounting for 6.70% of the total issued shares. The shares will be locked up for a period of 6 months to 1 year, and the transaction is expected to be completed by December 2025. After the completion of the transaction, SYL will be consolidated into the company's financial statements. Acquisition of China's third largest beauty service brand, SYL, further enhances market share According to Sullivan, SYL is the third largest beauty service brand in China in 2024, with revenue/net profit of HK$850 million/ HK$80 million in 2024, a net profit margin of 9.6%, and cash/equivalents/operational cash flow of HK$360 million/ HK$240 million respectively. The company operates 163 lifestyle beauty stores and 19 medical beauty clinics in 48 cities in China as of 1H 2025, with over 90% of revenue coming from the top 20 first-tier and new first-tier cities in China. After the acquisition, the company and SYL will collectively cover 42% of high-end commercial properties in the top 20 first-tier and new first-tier cities in China, continue to expand market share in high-end beauty services, and approximately 60,000 direct active members of SYL will be integrated into the company's system, driving a 44% increase in the group's direct active member count compared to 2024, and increasing the value of high-quality members. Integration and empowerment to drive operational efficiency, synergies expected to be unleashed With over 32 years of successful merger and integration experience in the industry, the company is expected to systematically output the capabilities of medical beauty and sub-health medical services to the SYL, covering customers' full-cycle demands for beauty and health, and optimizing its operational efficiency and profitability through customer refineme