\u3000\u3 Shengda Resources Co.Ltd(000603) 605 Proya Cosmetics Co.Ltd(603605) )
Key elements of the report:
On April 21, 2022, the company released the annual report of 2021 and the first quarterly report of 2022.
Key investment points:
The performance of the company achieved brilliant growth, and the operating cash flow increased significantly year-on-year. In 2021, the company achieved a revenue of 4.633 billion yuan (year-on-year + 23.47%), a net profit attributable to the parent company of 576 million yuan (year-on-year + 21.03%), and a net cash flow from operating activities of 830 million yuan (year-on-year significant + 150.24%), mainly due to the year-on-year growth of revenue and the decrease of accounts receivable due to offline inventory and de credit. In 2022q1, the company achieved a revenue of 1.254 billion yuan (year-on-year + 38.53%), a net profit attributable to the parent company of 158 million yuan (year-on-year + 44.16%), and a bright performance growth.
The main brand Proya Cosmetics Co.Ltd(603605) has further broken through the circle around large single products, and the income of sub brand Caitang has increased significantly.
(1) category: in 2021, the revenue of skin care (including cleansing) products was 3.978 billion yuan (year-on-year + 22.70%), accounting for a slight decline to 86.10%. The income of cosmetics products was 618 million yuan (year-on-year + 32.97%), accounting for 13.38%. Face cream essence: (2) sub brand: the company’s main brand Proya Cosmetics Co.Ltd(603605) continues to build large single product matrix, focusing on essence, facial mask, eye cream, cream and other categories, and optimizes and upgrade existing large single products, and continues to develop new brand products. In 2021, the main brand Proya Cosmetics Co.Ltd(603605) revenue was 3.829 billion yuan (year-on-year + 28.25%), of which large single products accounted for more than 25%. The sub brand Caitang focuses on Tang Yi’s makeup concept, seizes the market share of medium and high-end makeup, continues to infiltrate new media, and creates product differentiation and professional makeup attributes. In 2021, Caitang’s revenue was 246million yuan (a year-on-year increase of +103.48%). In addition, other brands achieved revenue of 409 million yuan (year-on-year – 5.96%); The inventory of cross-border brand agency business was cleared, and the revenue was 136 million yuan (year-on-year – 34.04%).
Online growth exceeded expectations, and offline outlets and product structure were adjusted. Tiktok: (1) online: in 2021, the company continued to deepen the electricity supplier channel, and implemented precise strategies in Tmall, jitter, Kwai, Jingdong and other electronic commerce platforms. The company’s online channel revenue reached 3.924 billion yuan, a year-on-year increase of + 49.54% (year-on-year increase of + 58.59% in 2020), and continued to achieve brilliant growth on the high base in the same period last year, accounting for a year-on-year increase of 14.92 PCT to 84.93%. Among them, the online direct sales revenue was 2.803 billion yuan (year-on-year + 76.16%), accounting for 60.66%. (2) Offline: in 2021, the company’s offline channel revenue was 696 million yuan (year-on-year – 38.03%), of which the daily chemical channel revenue was – 40.52% year-on-year. The decline in offline channel revenue was mainly due to the adjustment of outlets, active destocking and adjustment of product structure. In addition, due to the impact of the epidemic, the passenger flow of stores decreased.
The gross profit margin has increased significantly, and new brand incubation and brand remodeling have increased the rate of sales expenses. In 2021, the company’s gross profit margin increased by 2.91 PCT year-on-year to 66.46%, mainly due to the continuous promotion of large single product strategy, the increase in the proportion of online direct sales and the increase in the proportion of Proya Cosmetics Co.Ltd(603605) and Caitang brands with high gross profit. The net interest rate fell slightly by 0.02 PCT to 12.02%. The sales / management / R & D expense rates were 42.98% / 5.12% / 1.65% respectively, with a year-on-year increase of + 3.08 / – 0.32 / – 0.27 PCT respectively. Among them, the significant year-on-year increase in sales expense rate is due to the year-on-year increase of 36.45% in image publicity and promotion fee, and the increase of 3.44 percentage points in image publicity and promotion fee. Among them, the image publicity and promotion fee of new brand incubation (such as Caitang and correctors) and brand reconstruction (such as yuefuti) is higher.
Profit forecast and investment suggestion: at present, the company’s large single product matrix is continuously improved, from essence to face cream, eye cream and other categories, from anti-aging to repair effect, multi category and multi fields to seize the user’s mind, thereby improving the customer price and repeat purchase rate. The incubation of new brands such as Caitang and or and the reconstruction of old brands are expected to create a second growth curve. We expect that the growth rate of the company’s net profit attributable to the parent company from 2022 to 2024 will be 26% / 26% / 25% respectively, and the PE corresponding to the closing price on April 21, 2022 will be 50 / 40 / 32 times respectively, maintaining the “overweight” rating.
Risk factors: brand incubation is less than expected risk, and market competition intensifies risk.
