\u3000\u3 Guocheng Mining Co.Ltd(000688) 793 Shenzhen Breo Technology Co.Ltd(688793) )
Event: Shenzhen Breo Technology Co.Ltd(688793) published the annual report of 2021 and the quarterly report of 2022. The company achieved revenue of 1.19 billion yuan in 2021, yoy + 43.9%; Achieved performance of RMB 90 million, yoy + 29.9%. After conversion, Q4 achieved revenue of 380 million yuan in a single quarter, yoy + 23.8%; Achieved performance of RMB 30 million, yoy-31.8%. In the single quarter of Q1 in 2022, the revenue was 250 million yuan, yoy + 15.3%, and the performance was – 10 million yuan, yoy-188.8% Shenzhen Breo Technology Co.Ltd(688793) consolidate the advantageous channels of e-commerce, timely optimize the structure of offline stores, and actively respond to the impact of the epidemic. The revenue has maintained steady growth in the past two quarters. However, the profitability of Q1 company is under short-term pressure due to the repeated epidemic, the rise in the price of raw materials, the increase in channel promotion expenses and other factors.
E-commerce channels continued the trend of high growth, and the revenue of Q1 increased steadily in a single quarter: the growth rate of Q1 Shenzhen Breo Technology Co.Ltd(688793) revenue slowed down compared with the previous period, mainly because the occasional outbreak of Q1 in China restricted the operation of offline stores. However, the company timely optimized the channel layout, strengthened the construction of e-commerce channels, and the rapid growth of online revenue promoted the steady improvement of overall revenue, reflecting its strong business toughness and growth ability. Channel: 1) the company continuously improves the layout of the channel, increases investment in online B2C channels, expands the emerging business channels such as jowl and Xiao Hong, and continues to grow tiktok. Q1 company’s online revenue yoy + 48.8% (2021q4 + 59.0%). 2) The operation of the company’s offline stores has been repeatedly affected by the epidemic, especially the implementation of static management in some cities of Q1, which has a great impact on the operation of the company’s local stores. The offline revenue of Q1 company is yoy-15.4% (2021q4 is – 9.2%). Products: the company adheres to the product innovation and traditional Chinese medicine technology product line. In addition to continuously iteratively upgrading the new products of massagers, the company innovatively developed and launched Jiang Xiaozhu intelligent open fire moxibustion box, opening up a new track of moxibustion series. In 2021, the revenue of moxibustion series products of the company accounted for 5.1%. According to the data of business consultant, the revenue of Q1 Shenzhen Breo Technology Co.Ltd(688793) moxibustion series products accounts for 12.2% of the revenue of Amoy department. Moxibustion has a large consumer group and broad market space, which is expected to continue to contribute to the increase of income. Subsequently, as the company continues to expand new products and new channels, the company’s revenue is expected to maintain rapid growth.
The profitability of Q1 has declined: Shenzhen Breo Technology Co.Ltd(688793) Q1’s performance has suffered a small loss, mainly because: 1) the occasional epidemic in Q1 has a great impact on the operation of offline stores, but the store expenses such as rent and employee compensation are relatively rigid, resulting in the overall loss of offline stores in Q1. 2) The price of Q1 raw materials is still high and the cost pressure is great. The gross profit margin of Q1 company is -2.8pct year-on-year. 3) The company increased investment in e-commerce channels and increased support for industrial technology research institutes. The cost rate during Q1 was + 5.4pct year-on-year, including sales cost rate, management cost rate and R & D cost rate of + 3.6 / + 1.1 / + 1.3pct year-on-year respectively. Looking forward to the follow-up, the company will continue to optimize its offline stores and reduce fixed costs, which is expected to reduce the adverse impact of the epidemic on its operation. The company will strengthen marketing and R & D, and new products and new channels are expected to increase the company’s revenue, enhance the scale effect, and improve its profitability.
Issue stock incentive plan: Shenzhen Breo Technology Co.Ltd(688793) announce the restricted stock incentive plan, which plans to grant 1.77 million restricted shares to 149 incentive objects, accounting for 2.9% of the total share capital, and the grant price is 27.40 yuan / share. The company level performance assessment objective is: the annual compound growth rate of revenue and performance from 2022 to 2024 shall not be less than 30%. In addition, the company also stipulates the performance appraisal requirements at the individual level of incentive objects. The company’s stock incentive plan will effectively bind the interests of senior executives, core personnel and the company and ensure the long-term development of the company.
Investment suggestion: the small massager industry has strong growth attributes, and there is great room to improve the scale and concentration of the industry. Shenzhen Breo Technology Co.Ltd(688793) has been deeply engaged in the industry for 20 years, with outstanding advantages in products, channels and brands, which is expected to continue to lead the development of the industry. We expect the company’s EPS to be 2.05/2.72/3.55 yuan from 2022 to 2024; Maintain the Buy-A investment rating, with a six-month target price of 71.77 yuan / share, equivalent to 35 times the dynamic P / E ratio in 2022.
Risk tip: the price of raw materials has risen sharply, the competition pattern of the industry has deteriorated, and the expansion of the company’s stores is less than expected
