\u3000\u3 Guocheng Mining Co.Ltd(000688) 793 Shenzhen Breo Technology Co.Ltd(688793) )
Key investment points
2021a: online direct sales revenue increased rapidly, and the company’s new products expanded smoothly
In 2021, the company realized an operating revenue of 1.190 billion yuan, a year-on-year increase of + 43.93%; The net profit attributable to the parent company was 91.86 million yuan, a year-on-year increase of + 29.92%. 1) Revenue side: by product, in 2021, the company’s head / neck / eyes / scalp achieved operating revenue of RMB 9.11/3.10/299122 million respectively, with a year-on-year increase of + 11.11% / + 50.19% / + 19.35% respectively. The company’s new products have performed beautifully in the past 21 years. In 2021, the company’s new product revenue reached 237 million yuan, accounting for 19.89% of its main business revenue. Among them, the moxibustion sales launched by the company in the second half of the year reached 60.25 million yuan, accounting for 5.07% of the annual main business income. The market share of the company’s neck massager on tmall platform has increased from 4.03% in 2020 to 9.48% in 2021. By channel, the company’s revenue from online direct selling / offline distribution / offline direct selling in 2021 was 445 / 142 / 297 million yuan respectively, with a year-on-year increase of + 61.87% / + 12.33% / + 33.88% respectively. During the reporting period, the company actively laid out e-commerce platforms to achieve high growth in online revenue. At the same time, under the influence of covid-19 epidemic, the company optimized the structure of offline stores and increased the proportion of stores in shopping centers. 2) Expense side: the company’s sales expense rate / management expense rate / R & D expense rate in 2021 are 40.75% / 3.43% / 3.97% respectively. During the reporting period, the company increased its R & D efforts, the number of R & D personnel increased from 98 to 126, and the average salary increased, which helped to stimulate the enthusiasm of R & D personnel and promote product renewal and iteration. The promotion fee under the company’s sales expenses in 21 years was 132 million yuan, a year-on-year increase of + 93.31%. The main reason is that the company employs top stream spokesmen to improve brand awareness, and promotes through online social platforms to improve the conversion rate of consumers.
2021q4: the company achieved an operating revenue of 376 million yuan, a year-on-year increase of + 23.77%; The net profit attributable to the parent company was 26 million yuan, a year-on-year increase of – 31.78%. Q4 revenue growth slowed compared with the first three quarters, mainly due to the suspension of operation of some stores affected by the epidemic. The fixed cost of Direct stores is high and it is a rigid expenditure, which puts pressure on the company’s Q4 performance. The gross sales difference of 21q4 is 13.68%, down 5.91pct year-on-year.
2022q1: affected by the local epidemic, the performance of 22q1 is under pressure
During 22q1, the company realized an operating revenue of 248 million yuan, a year-on-year increase of + 15.29%; The net profit attributable to the parent company was -9.89 million yuan. 1) Affected by the epidemic, the passenger flow of commercial places such as transportation hubs decreased to a certain extent, which had a negative impact on the operation of the company’s offline Direct stores. 2) During the reporting period, we strengthened the expansion of online B2C channels and new media channels, and achieved an operating revenue of 164 million yuan, a year-on-year increase of + 48.77%. In terms of offline channels, the company enhanced the effect of online drainage, reduced fixed costs and made efforts to reduce the adverse impact of the epidemic on offline channels. 22q1’s offline channels achieved an operating revenue of RMB 80.06 million, a year-on-year increase of – 15.38%. 3) The company is still in the stage of market expansion and needs to invest in sales expenses. The company’s sales expense ratio in 2022q1 was 45.68%, with a year-on-year increase of 3.62pct. As an early investment, the sales expense is necessary to accumulate.
Implement equity incentive to demonstrate long-term confidence
1) on April 21, 2022, the company drew up a restricted stock incentive plan (Draft), granting 1.77 million restricted shares to incentive objects (accounting for 2.87% of the company’s 61.64 million shares), including 1.42 million shares to 149 employees for the first time, and the remaining 353900 shares will be granted to reserved incentive objects. 2) The stock source of the incentive plan is ordinary A shares issued in a directional manner. The grant price is 27.40 yuan / share, which is vested in three phases, and the proportion of each phase is 1 / 3. 3) The performance assessment objective of the company is based on 2021. The growth rate of operating revenue and net profit of the company from 2022 to 2024 shall not be less than 30.00%, 69.00% (an increase of 30% compared with the previous year) and 119.70% (an increase of 30% compared with the previous year). 4) We believe that this grant of stock options will help the company bind core talents and demonstrate the company’s determination for future development.
Profit forecast and valuation
Massage industry is still in the stage of small-scale and high penetration growth. As an excellent enterprise in the field of massage home appliances, the company has outstanding brand power, channel power and product power. It is expected that the performance of the company will develop rapidly. We predict that the company’s EPS will be 1.96 yuan / share, 2.58 yuan / share and 3.46 yuan / share from 2022 to 2024, with corresponding growth rates of 31.30%, 31.71% and 34.23% respectively.
Risk tips
The impact of the epidemic exceeded expectations; Downstream consumer demand was lower than expected.
