\u3000\u3 Shengda Resources Co.Ltd(000603) 605 Proya Cosmetics Co.Ltd(603605) )
Event: the company released the annual report of 2021 and the first quarterly report of 2022. In 2021, the company achieved an operating revenue of 4.63 billion yuan, a year-on-year increase of 23.5%, and a net profit attributable to the parent company of 580 million yuan, a year-on-year increase of 21%. In 2021, Q4 company achieved an operating revenue of 1.62 billion yuan, a year-on-year increase of 10.9%, and a net profit attributable to the parent company of 210 million yuan, a year-on-year increase of 10.9%. In 2022, Q1 company achieved an operating revenue of 1.25 billion yuan, a year-on-year increase of 38.5%, and a net profit attributable to the parent company of 160 million yuan, a year-on-year increase of 44.2%.
The online channel has performed brilliantly, and the main brand continues to make efforts. In 2021, the company’s revenue maintained a stable growth. From the perspective of channels, the online channel achieved a revenue of 3.92 billion yuan, a year-on-year increase of 49.5%, accounting for 84.9%; Offline channels achieved a revenue of 700 million yuan, a year-on-year decrease of 38%, accounting for 15.1%. Online channels were mainly direct tiktok, including Tmall, jowl and Jingdong, accounting for 45%, 15% and 10% respectively, representing a substantial increase compared with the same period last year. Due to the adjustment of outlets, offline channels took the initiative to inventory and adjust the product structure. In addition, the epidemic affected offline passenger flow, and the revenue decreased year-on-year. By product, the main brand Proya Cosmetics Co.Ltd(603605) achieved a revenue of 3.83 billion yuan, a year-on-year increase of 28.3%, accounting for 82.9%; Caitang, a cosmetics brand, achieved a revenue of 250 million yuan, a year-on-year increase of 103.5%, accounting for 5.3%. The two main brands continued to make efforts and achieved substantial growth year-on-year.
Profitability increased steadily and performance maintained rapid growth. In 2021, the net profit attributable to the parent company increased by 21%, and in the first quarter of 2022, the net profit attributable to the parent company increased by 44.2%, maintaining a high-speed growth trend. In 2021, the gross profit margin of the company was 66.5%, with a year-on-year increase of 2.9pp, and the net profit margin was 12%, which remained stable year-on-year. Gross margin improvement mainly came from 1) improved product mix, higher gross margin of large single product share, including cream, cream, eye cream and sun protection. Gross margins were at 70%-75%, 2) channel structure improved, online channels with higher gross margin accounted for a substantial increase, online channel gross margin 68.3%, line channel gross margin 56.9%, 3) main brand gross margin was higher than average, Proya Cosmetics Co.Ltd(603605) and Cai Tang gross profit rate were about 70%. Revenue accounted for nearly 90%. The company’s sales expense rate was 43%, up 3PP year-on-year, the management expense rate was 5.1%, down 0.3pp year-on-year, the R & D expense rate was 1.7%, down 0.3pp year-on-year, the overall expense rate increased slightly, and the profitability maintained a steady growth trend.
Based on the “6 n” strategy, adhere to the large single product + multi brand matrix. Essence face cream, eye cream facial mask and other products are focused on creating a large single product matrix with Proya Cosmetics Co.Ltd(603605) brand as its core. It speeds up the upgrading and upgrading of existing products, strengthens brand image promotion and promotes brand image through joint IP and public welfare activities. Kwai Tong and Off&Relax, a brand name for color cosmetics, will also be actively incubated with new brands. By increasing the new platform of jitter and fast hand, the new tiktok and the fine operation will expand the scope of consumers’ touchdown and seize the make-up and market. It is expected to form a second growth curve.
Profit forecast and investment suggestions. It is estimated that the company’s EPS from 2022 to 2024 will be 3.58 yuan, 4.58 yuan and 5.69 yuan respectively, and the net profit attributable to the parent company will maintain a compound growth rate of 25.7% in the next three years. Considering that the market share of the company’s main brand continues to grow, the incubation of sub brands is beginning to take effect, and the long-term growth capacity is sufficient in the future, so the “hold” rating is maintained.
Risk tip: the industry competition intensifies and the promotion of new products is less than expected.
