\u3000\u3 Shengda Resources Co.Ltd(000603) 605 Proya Cosmetics Co.Ltd(603605) )
Events
In 2021, the company achieved an operating revenue of 4.633 billion yuan, a year-on-year increase of 23.47%; The net profit attributable to the parent company was 576 million yuan, a year-on-year increase of 21.03%; The non net profit deducted from the parent company was 568 million yuan, a year-on-year increase of 20.89%. The net operating cash flow was 830 million yuan, an increase of 150.24% over the same period last year.
In the first quarter of 2022, the company realized an operating revenue of 1.254 billion yuan, a year-on-year increase of 38.53%; The net profit attributable to the parent company was 158 million yuan, a year-on-year increase of 44.16%; The non net profit deducted from the parent company was 147 million yuan, a year-on-year increase of 36.21%. The net operating cash flow was 342 million yuan, a year-on-year increase of 521.66%.
Large single product strategy to build the main brand Proya Cosmetics Co.Ltd(603605) competitiveness, actively layout the superimposed content operation of online proprietary channels, and constantly strengthen the comprehensive strength of the brand
From the perspective of sales channels, the main source of growth is the growth of online sales revenue. Online channels, especially the direct links, have become the core composition of the company’s revenue. The company’s main business is Tmall, Jingdong and other platforms, and expand the emerging platforms such as Taobao, vip.com, tiktok and other platforms. During the reporting period, the company continued to carry out large single product + refined operation reform. On the one hand, the company focused on creating super billion star single products and forming a differentiated product structure; On the other hand, optimize the rhythm of launch expenses and finely manage the renewal and re purchase of stores. The epidemic situation and the post epidemic era mainly affected the operation of offline channels, and the link of consumers to stores was impacted. Under this background, the company responded positively. It not only adjusted and upgraded the existing outlets and simplified offline outlets, but also took the initiative to remove inventory, strengthen inventory management and adjust product structure. As a result, many factors led to the decline of the operation scale of the company’s offline channels.
From the perspective of brand, with the gradual expansion of the company’s brand matrix, except that the main brand Proya Cosmetics Co.Ltd(603605) . During the reporting period, the revenue growth of beauty and cosmetics mainly relied on Caitang brand to achieve a revenue of 246 million yuan, a year-on-year increase of 103.48%.
From the perspective of category, the trend of skin care (the main category covered by the main brand Proya Cosmetics Co.Ltd(603605) is consistent with that of the brand, while the cosmetics are mainly dominated by Caitang and other brands, and the development trend remains synchronized. From the operating data, the market is more popular in the fourth quarter, the skin care and beauty products market is hotter. The sales volume of skin care products (including cleansing) and cosmetic products is higher than that of the first three quarters. Meanwhile, the sales of high priced products such as essence, eye cream, face cream, etc. in the skin care category, such as high gloss and dressing, are increasing. To sum up, the total operating revenue of the company in the fourth quarter was higher than that in the first three quarters, and the contribution of revenue accounted for 34.98%. Due to the excessive release of demand in the second half of 2020, raising the base, under the condition of simultaneous increase of volume and price, the revenue growth rate shows a decreasing trend quarter by quarter, which is in line with previous expectations. Due to the business adjustment, inventory clearing and discount treatment of some products of other agent brands, the price fell and the sales volume did not increase significantly. 2022q1 continues the rising trend of sales unit price of skin care and cleansing products and color makeup products.
From the quarterly perspective, 21Q4’s sales scale grew well, and it accorded with the traditional peak season trend. With the boom of the national day, the “double eleven” and the second sales, the popular products such as the ruby essence, the double resistance essence and so on were all good performances. The overall sales situation was driven by the large single products, and the contribution to the fourth quarter revenue reached 34.98%. Although 22q1 is in the relatively off-season of sales throughout the year, it includes Valentine’s day, women’s day and other festival time points. Since the beginning of the year, the company has actively carried out content marketing such as “early C and late a” and “lion awakening girl”, effectively grasped market opportunities and achieved outstanding growth performance.
In 2021, the annual comprehensive gross profit margin increased by 2.91 PCT, and the period expense rate increased by 2.69 PCT; In 2022q1, the comprehensive gross profit margin increased by 3.16pct and the period expense rate decreased by 0.19pct
In 2021, the gross profit margin of the company’s overall sales improved significantly, and the growth trend in 22q1 remained unchanged. First, the company continues to promote the strategy of large single products, shorten the cycle and quickly iterate. The sales of high profit products such as essence and eye cream in skin care products increased rapidly, which brought about a structural improvement in gross margin. Meanwhile, the new color cosmetics brand “Cai Tang” has gradually become one of the brand names after the ” Proya Cosmetics Co.Ltd(603605) ” after a year of market precipitation. Its market position is higher, and the average price of products is higher than that of the previous cosmetics and beauty products. Therefore, facing the performance pressure caused by the rising cost of raw materials and the impact of cross-border agent clearance, the company still achieved a steady increase in the overall gross profit margin. Second, from the perspective of channels, the proportion of online direct sales with high gross profit and more accurate company control continues to rise, becoming the absolute main force of the company’s business growth; On the other hand, the company grasps the short video and live broadcast outlet, emphasizes brand self broadcast, and realizes that the self broadcast sales exceed the sales of qualified people, so as to increase the proportion of online self broadcast and optimize the operation efficiency.
The net interest rate of the company decreased slightly in 2021 due to the increase of period expenses. Among them, in order to incubate new products such as “Caitang” and “corrctors” and reshape the brand, the company has significantly increased the investment in marketing funds and image publicity and promotion expenses (a year-on-year increase of 447 million yuan to 1.673 billion yuan), so the sales expenses have increased by 494 million yuan to 1.991 billion yuan, which has the greatest impact.
Sublimate the fine operation management system and continue to build and optimize the core large item matrix
In terms of products, based on the increasingly mature digital management of the whole product life cycle, Proya Cosmetics Co.Ltd(603605) brand upgrades and expands the existing large items, and launches a new series of large items. Through large items, it further shapes the brand’s sense of technology and youth, continues to seize the user’s mind, improve the customer unit price and repurchase rate, and enhance the brand stickiness. During the reporting period, the ingredients, formula and package of ruby essence and double anti essence were upgraded, and the 2 version was released. The main products are Ruby cream, ruby eye cream, night face cream, double anti facial mask, etc. New source of power maintenance essence, bowling blue bottle, feather feeling sunscreen and other new large single products. In addition, we will continue to expand the reach of the promotion of large items, from the vertical group of beauty makeup to all kinds of Pan American makeup groups; Improve the promotion efficiency of large single products, and carry out full link optimization intervention from consumer touch and interest to trust building and transaction transformation; Deepen the cooperation relationship with talent and refine the content operation mechanism, and form high-frequency communication with target users. Use cost-effective and efficient delivery model and excellent products that meet the needs of consumers. Push ” Proya Cosmetics Co.Ltd(603605) really different” in the minds of consumers last year to ” Proya Cosmetics Co.Ltd(603605) is the light of domestic goods that can represent China to compete with the world”, and continue to move towards a higher ladder.
In terms of marketing, Proya Cosmetics Co.Ltd(603605) brand continues the “spirit of discovery”, talks with the public with a sincere and equal attitude, continues to pay attention to social hot spots and output clear views, and undertakes the social responsibility of well-known domestic beauty brands with public welfare actions. During the reporting period, brand marketing events were carried out. For example, the “fight with Shanghai New World Co.Ltd(600628) in the first year of graduation” planned in the first three quarters paid attention to the living conditions of new employees in the workplace; “Gender is not the boundary line, prejudice is”, explore the topic of “gender equality”; Guan Xuan and China Aerospace IP jointly paid tribute to the 65th anniversary of China’s aerospace journey with “from China, flying to the universe”; Put forward the activity of “dare to love, dare not to love” and launch a discussion on love with Shanghai translation; Launch “pay tribute to everyone who goes to find” high combustion mixed clip to convey the brand “spirit of discovery”.
In addition, in the fourth quarter, the company continued to make efforts in brand marketing. In September, “a letter from the beginning of school was written to the 18-year-old himself”, focusing on the theme of youth growth through the scene of “the beginning of school”, inviting the tour group band to create new songs and explore the deep significance of growth with consumers. In October, on World Mental Health Day, China Youth Daily and one psychology jointly launched ” Proya Cosmetics Co.Ltd(603605) youth mental health public welfare action – echo plan”, successively released the theme film “don’t be ashamed of your emotions”, and jointly filmed four series of documentaries. Join hands with “China Youth Development Foundation” to carry out long-term public welfare projects. The above marketing activities, on the one hand, reflect the company’s deep sense of social responsibility, on the other hand, also create a warm and healing brand image.
In terms of channels, the company maintains the overall rapid growth of online channels, generates “new channel strategy” according to the characteristics of multiple platforms, and actively adjusts the offline layout while deeply cultivating mature e-commerce platforms and grasping emerging channels. In terms of online channels, during the reporting period, we continued to consolidate the strategy of large single products and create super billion star single products; Fine operation shall be carried out for self broadcasting to improve the proportion of self broadcasting sales; Comprehensively upgrade the renewal and re purchase operation of members, improve the renewal ability of stores and the proportion of store members, improve the quality of store people and customer unit price, and upgrade from the perspective of vision, content and service experience. Tiktok and other Kwai Fu new platforms, the company seize short video and live air outlets, emphasizing brand self broadcast, self sales sales more than master sales; Cooperate with high-quality anchor year frame to cover middle waist anchor and non vertical anchor; Optimize the product structure, increase the proportion of large single products, and improve the gross profit and net profit; Pay attention to fan operation and improve operation quality. In terms of offline channels, adjust and upgrade the existing outlets, adjust the product structure, optimize the training system and improve the awareness of terminal services. Focus on building department store systems such as Yintai, Chongbai and Tianhong, expand other high-quality department store systems, strengthen inventory management, customize product portfolio suitable for commercial supermarket channels, and enhance BA’s initiative.
Focus on R & D to ensure the internal driving force of core growth, strengthen the supply chain and ensure the flexible touch of consumer demand
In terms of R & D, the company continued to promote the R & D mode of focusing on independent R & D, supplemented by the combination of industry, University and research. By strengthening independent R & D capabilities and integrating global R & D resources, the company continued to build and optimize the core large item matrix on the basis of keen insight into consumer needs. Establish an international research and Development Center for raw materials and strengthen the research and development of raw materials on the basis of the original skin science. Participate in the formulation of national standards – Determination of fluorescent brightener 367 and fluorescent brightener 393 in cosmetics by liquid chromatography tandem mass spectrometry; Participate in the formulation of group standards – disinfection technical specifications for cosmetics manufacturers. At the same time, following the signing of strategic cooperation with BASF (China) Co., Ltd., the company signed strategic cooperation agreements with DSM (China) Co., Ltd., Ashland (China) Investment Co., Ltd., Evonik specialty chemicals (Shanghai) Co., Ltd. and Croda chemicals (Shanghai) Co., Ltd., enriching the comprehensive strength of the trinity of industry, University and research of the company. During the reporting period, 19 national authorized invention patents were newly obtained, 11 invention patent applications and 10 appearance patent applications were newly submitted. By the end of the reporting period, the company had 92 national authorized invention patents, 19 utility model patents and 90 appearance patents, totaling 201.
In terms of supply chain, the company has always been customer-oriented. Through the continuous upgrading and transformation of supply chain automation, digitization and intelligence, the company has opened up the data information chain from production end to demand end, and provided sufficient product supply and logistics delivery guarantee for Wuxi Online Offline Communication Information Technology Co.Ltd(300959) sales with more accurate and agile market response ability. During the reporting period, Huzhou production base transformed the manufacturing workshop, added several sets of emulsifying units and upgraded the production capacity; The construction of logistics intelligent storage center has started to help upgrade the supply chain; Establish multiple sub warehouses across the country, with finer logistics layout, more diversified and convenient logistics delivery channels, and improved terminal satisfaction. In addition, at the level of informatization construction, the company built a supply chain informatization platform based on big data and 5g network combined with Internet of things related technologies. During the reporting period, it was awarded the contractor of Zhejiang supply chain collaborative innovation complex. At the same time, in terms of safety production, purchase special safety facilities and emergency rescue equipment to provide guarantee for emergency rescue treatment in limited space; Add online monitoring system, network with government video monitoring platform and incorporate intelligent management.
Investment advice
We believe that on the one hand, the company has maintained sustained growth in traditional brands (main brand Proya Cosmetics Co.Ltd(603605) , core category skin care products) and advantageous channels (online channels). On the other hand, the company has vigorously promoted the ecological development strategy of multi brand, multi category and multi-channel, guided by consumer demand, complied with the trend of channel reform, and the growth rate of new brands and new categories is bright. The organization platform provides guarantee for the company’s ecological growth, maximizes resource sharing and improves production and operation efficiency; Continuous brand upgrading, new product listing and large single product strategy to improve brand image and spread brand spirit; Content, spokesperson and other diversified integrated marketing to expand brand awareness; Solid scientific research and innovation ability to achieve brand quality assurance. We predict that in 2022, 2023 and 2024, the company will achieve revenue of RMB 5.734/7.13/8.350 billion, net profit of RMB 715/8.83/1.062 billion, corresponding to PS of 6.34/5.18/4.35 times, EPS of 3.57/4.40/5.30 yuan / share and PE of 51 / 41 / 34 times respectively, maintaining the “recommended rating”.
Risk tips
The risk that the development of daily chemical industry is less than expected; Risks of intensified market competition and reduced industry concentration; The risk of brand channel promotion falling short of expectations.
