\u3000\u3 Shengda Resources Co.Ltd(000603) 605 Proya Cosmetics Co.Ltd(603605) )
Key investment points:
Performance overview: Recently, the company released the annual report of 2021 and the first quarterly report of 2022. In 2021, the company achieved annual revenue of 4.633 billion yuan / + 23.47%, net profit attributable to parent company of 576 million yuan / + 21.03%, net profit not attributable to parent company of 568 million yuan / + 20.89%; In 2021q1, the revenue was 1.254 billion yuan / + 38.53%, the net profit attributable to the parent company was 158 million yuan / + 44.16%, and the net profit not attributable to the parent company was 147 million yuan / + 36.21%.
Revenue: multiple brands have developed together, the proportion of makeup categories has increased, and online sales have continued to grow at a high rate. 1) From the perspective of brand, the main brand Proya Cosmetics Co.Ltd(603605) grew steadily, and the second brand Caitang performed well. In 2021, the revenue of Proya Cosmetics Co.Ltd(603605) main brand reached 3.829 billion yuan / + 28.25%, with a year-on-year increase of 3.21 PCTs to 82.87%, and the revenue of Caitang reached 246 million yuan / + 103.48%, with a year-on-year increase of 2.10 PCTs to 5.33%; 2) In terms of categories, the proportion of makeup categories has increased, and the richness of the company's categories has been further improved. In 2021, the company achieved revenue of 3.978 billion yuan / + 22.70%, accounting for a slight year-on-year decrease of 0.40pcts to 86.10%, and revenue of 618 million yuan / + 32.97%, accounting for a year-on-year increase of 0.97pcts to 13.38%; 3) From the perspective of channels, online sales continue to grow at a high rate and offline sales are under pressure. In 2021, the company's online channel revenue was 3.924 billion yuan / + 49.54%, with a year-on-year increase of 14.92pcts to 84.93%, and the offline channel revenue was 696 million yuan / - 38.03%, with a decrease of 15.07%.
Profitability: the continuous upgrading of large single products boosted the gross profit margin, the sales expense rate increased in the stage of main brand reconstruction and new brand incubation, and the net profit margin was flat. In 2021, the company's high margin essence large items accounted for about 25% of the main brands, boosting the overall sales gross profit margin by 2.91pcts to 66.46% year-on-year. On the expense side, the company's sales expense rate / management expense rate / R & D expense rate increased by + 3.08pcts / - 0.32pcts / - 0.27pcts to 42.98% / 5.12% / 1.65% year-on-year, and the net sales interest rate decreased slightly by 0.02pcts to 12.02% year-on-year.
Core advantage: flexible and efficient organizational structure to support the company's strategic transformation. 1) R & D + multi department collaboration, and remarkable results have been achieved in the circle of large single products: in recent years, the company has used market-oriented thinking to empower R & D, gradually break through the functional barriers between R & D and market, operation, marketing and other departments, and change to a more flexible and efficient project system. Since 2019, the company has made efforts to gain insight into the terminal market, gradually and smoothly tap the pain points of consumers, determine the core efficacy and "selling points" of products in combination with the company's R & D advantages, consider the sales promotion mode simultaneously in the R & D process, and output the product efficacy test, safety and satisfaction test to the downstream sales team. The market-oriented product development has been successfully realized, and the large single product strategy has been smoothly promoted. Since 2021, the proportion of large items in the company's main channels has increased significantly. The proportion of large items in tmall channel has now been close to 60%, and that in JD channel has exceeded 20%. In addition, in February this year, Tiktok channel opened a new account to specialize in large items. At present, the daily sales range is RMB 5 Shenzhen Zhenye(Group)Co.Ltd(000006) 00000. This year, the proportion of large items in Tiktok channel is expected to increase strongly. We expect that the company's overall gross profit margin may have some room to rise this year; 2) In recent years, the company has paid attention to the intensive management of the middle office department and built a multi brand matrix with unified empowerment. For example, employees with strong ability under the Middle Office Department of product development can be flexibly deployed among various brand groups, In terms of external delivery, the Chinese and Taiwan departments of content development take the company as the main body, strengthen the cooperation between KOL and the company rather than with a single brand in the company, and create potential opportunities for the cooperation between large traffic and small brands. Since 2021, the losses of the company's cutting-edge brands and other small brands have gradually narrowed, and all turned into profits in 2022q1. The company's current ROI remains at the level of 1:3. We believe that the company's brand operation and management ability is improving day by day, which is expected to optimize its long-term profitability.
Investment advice and profit forecast: under brand upgrading, product optimization and refined channel management, the company has high certainty of performance growth and maintains the "recommended" rating of the company. On the one hand, the company's main brand upgrading and large single product strategy are successful, and the profit is expected to continue to be optimized. On the other hand, the similar skin care logic matches the company's experience, and the sub brands grow rapidly. We predict that the company's revenue from 2022 to 2024 will be 5.910/7.494/9.224 billion yuan respectively (with a year-on-year growth rate of 28% / 27% / 23% respectively), and the net profit attributable to the parent company will be 7.45/9.54/1.170 billion yuan respectively (with a year-on-year growth rate of 30% / 28% / 22% respectively), EPS is 3.70/4.74/5.81 yuan respectively, and the corresponding PE of current market value is 52X / 41x / 33x respectively. Considering that in the short term, the cosmetics and essence categories will work together to open up the space for the company to increase both volume and price, and in the long term, the company will build a multi brand matrix and carry out full link extension development. The company has begun to take shape as a cosmetics group. We give the company 60xpe in 2022, with a reasonable price range of 218.3-222.4 yuan, maintaining the company's "recommended" rating.
Risk tip: repeated outbreaks lead to weak terminal demand; Industry competition intensifies; The launch speed or effect of new products is lower than expected; The incubation of new brands was not as expected.
