\u3000\u3 Shengda Resources Co.Ltd(000603) 983 Guangdong Marubi Biotechnology Co.Ltd(603983) )
Key elements of the report:
On April 29, 2022, the company released the annual report of 2021 and the first quarterly report of 2022. In 2021, the company achieved a total operating revenue of 1.787 billion yuan (YoY + 2.41%), a net profit attributable to the parent company of 248 million yuan (YoY – 46.61%), and a net profit not attributable to the parent company of 179 million yuan (yoy-55.70%). In 2022q1, the company achieved a total operating revenue of 383 million yuan (YoY – 5.31%), a net profit attributable to the parent company of 65 million yuan (yoy-34.61%), and a net profit not attributable to the parent company of 57 million yuan (YoY – 40.20%).
Key investment points:
The channel transformation still needs to be effective, with stable revenue and declining profit: split the performance of 2021, the revenue maintained stable growth in the first half of the year, and the profit declined. In 2021h1, the revenue was 874 million yuan (YoY + 10.09%), and the net profit attributable to the parent company was 189 million yuan (yoy-29.46%). However, since 2021q3, due to the severe impact of the epidemic, the channel recovery of offline specialty daily chemical stores has not met expectations. With the addition of the company’s self built team to operate the “MARUMI tmall flagship store” and vigorously layout emerging live broadcast channels such as Tiktok and Kwai, the investment cost of online business transformation has increased significantly but still to be effective. The company’s transformation has not been as smooth as expected, resulting in a decline in Q3 revenue for the first time in a single quarter, and the parent company’s net profit is the first loss in a single quarter since listing. Q4 is affected by large-scale sales activities such as “double 11” and drives the marginal improvement of 2021 performance. In terms of channel revenue, online / offline revenue in 2021 contributed RMB 1.028699 billion respectively, accounting for 59.54% / 40.46% respectively. In 2022q1, the company achieved a total operating revenue of 383 million yuan (yoy-5.31%) and a net profit attributable to the parent company of 65 million yuan (yoy-34.61%). The revenue decreased slightly year-on-year, and the revenue has returned to the level before 2019. However, with the continuous reform of the company’s proprietary business, various expenses increased year-on-year, and the superimposed epidemic pressure remained unabated. The net profit attributable to the parent company in 2022q1 only recovered to 54% in 2019.
Cosmetics led the business to create a new growth curve in 21 years, and the increase in the price reduction of eye products dragged down Q1 performance: in 2021, the company realized the operating revenue of eye products, skin care products, skin cleansing products, color cosmetics and other products of 5.23/9.67/1.59/78 million yuan respectively, and yoy was – 17.12% / 7.22% / – 15.97% / 247.85% respectively. The revenue of eye products and skin cleansing products decreased year-on-year, the performance of skin care products was good, and the color cosmetics achieved a significant growth trend. The main reason is that the cosmetics brand love fire has completed the brand renewal. In half a year, the sales volume of Gmv is Shanghai Pudong Development Bank Co.Ltd(600000) , and the revenue is 661746 million yuan, with an increase of 463.49%. It is expected to open the second business growth curve of the company. In 2022q1, the operating revenue of eye products, skin care products and skin cleaning products was 80 / 203 / 45 million yuan respectively, and yoy was – 24.54% / – 20.90% / 32.44% respectively. The sales volume of eye / skin cleaning products decreased by 42.14% / 14.04% year-on-year, and the unit price increased by 30.41% / 54.07% year-on-year. This is mainly due to the large sales volume of eye boxes, eye masks and skin cleaning products in the same period of last year, which lowered the average unit price. In addition, 2022q1 new skin cleaning products have a high price and a large proportion of sales, driving the positive growth of Q1 skin cleaning product revenue.
The net profit margin declined and the sales expenses increased significantly due to channel transformation: the company’s gross profit margin in 2021 was 64.02%, with a slight decrease (- 2.19pcts) compared with the same period, mainly due to the slight increase in production costs and transportation costs. Among them, the gross profit margin increased by 7.27pcts year-on-year on-year on the basis of the bright revenue contributed by cosmetics and other products. The net interest rate in the year of 21 was 13.50%, with a year-on-year decrease of 13.06 PCTs, which was mainly due to the increase of various expenses caused by the company’s active layout of new channels and expansion of new businesses. During 2021, the expense rate was 47.92%, with a year-on-year increase of 11.50pcts, a significant increase. Among them, the sales expense rate is 41.48% (+ 9.16pcts), which is mainly due to the increase of promotion expenses, employee compensation and office expenses; The R & D expense rate is 2.83% (-0.05pct); The management expense rate is 5.62% (+ 1.11pcts), which is mainly due to the business development of the company, the increase of employees’ salaries and office expenses in functional departments; The financial expense rate is – 2.00% (+ 1.28pct). The net interest rate of 22q1 company was 16.77% (- 7.70pcts), and the sales / management / R & D / financial expense ratio was 37.49% / 6.46% / 3.45% / – 0.81% respectively, with a year-on-year increase of + 8.35 / + 1.23 / + 0.55 / + 1.95pcts respectively, mainly due to the slight year-on-year decrease of income in the current period and the expansion of self operated business, resulting in the year-on-year increase of various expenses.
Profit forecast and investment suggestions: judging from the performance of the first quarter, the company’s channel transformation has not been effective. We lowered the company’s profit forecast. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be RMB 222 / 263 / 300 million (before adjustment, it will be RMB 290 / 324 million from 2022 to 2023), the corresponding growth rates will be – 10% / 19% / 14% respectively, EPS will be RMB 0.55/0.66/0.75, and the closing price on April 29 will be 38 / 32 / 28 times of PE respectively. Due to the vigorous transformation of major brands to online, the online competition is heating up rapidly, and the cost investment is increasing, but it still needs to be effective. The transformation of the company is not as smooth as expected. The offline business is blocked by the continuous fermentation and recovery of sporadic epidemics in various places, and the performance pressure may last for some time; Second, the company is expected to find a new way to grow its business in the long term. In addition, the company adheres to adjustment in the transformation, starts in the transformation, develops innovation and technology simultaneously, always puts products first, continues to invest in R & D, widens the technical boundary, strictly abides by product quality and ensures product efficiency output; Continue to consolidate the brand and practice the younger and more scientific brand; Continue digital investment, promote the construction of cloud warehouse, etc., or have the opportunity to undertake development opportunities in a new round of reform in the cosmetics industry and maintain the “wait-and-see” rating.
Risk factors: Online growth does not meet expectations, product innovation does not meet expectations, and market competition intensifies.
