\u3000\u3 Bohai Water Industry Co.Ltd(000605) 266 Yunnan Jianzhijia Health-Chain Co.Ltd(605266) )
Event: in 2021, the company achieved a revenue of 5.235 billion yuan, a year-on-year increase of 17.21%; The net profit attributable to the parent company was 301 million yuan, a year-on-year increase of 19.66%; The net profit deducted from non return to parent company was RMB 283 million, with a year-on-year increase of 19.53%, realizing EPS 4.5% 36 yuan. In the first quarter of 2022, the company achieved a revenue of 1.45 billion yuan, a year-on-year increase of 24.28%; The net profit attributable to the parent company was 29 million yuan, a year-on-year decrease of 54.64%; The net profit deducted from non return to parent was 35 million yuan, a year-on-year decrease of 41.81% and eps0.5% 43 yuan.
Dragged down by store expansion expenses, the company’s performance was lower than expected. The company’s non attributable net profit deducted in 2021q4 increased by 20.01% year-on-year, and the non attributable net profit deducted in 2022q1 decreased by 41.81% year-on-year. The company’s profit fell sharply in the first quarter of this year, mainly because the rapid expansion of the self built scale of the company’s stores led to the increase of short-term performance pressure during the cultivation period of new stores and secondary new stores, and the increase of expenses in this period was higher than that of operating revenue.
The company’s stores are expanding rapidly and plans to enter the Hebei market. In 2021, the company had a net increase of 914 stores, and the total number of stores reached 3044. In the first quarter of 2022, the company had a net increase of 90 stores, and the total number of stores reached 3134. At present, the company plans to purchase 80% – 100% equity of Hebei Tangren Pharmaceutical Co., Ltd. by paying cash to promote the company’s business expansion in the Bohai Rim region with Beijing, Tianjin and Hebei as the core.
The sharp increase in sales expenses affects profits. As of March 2022, the proportion of new stores and sub new stores of the company has reached 34.52%. The expenses invested in the early stage are high and rigid before the new stores reach profit and loss balance after the cultivation period of 2-3 years. During the reporting period, the sales expenses increased by 37.36% year-on-year and the financial expenses increased by 88.58%. Under the background of the epidemic, the increase of labor and rental costs exceeded the increase of 24.28% of operating revenue, which had a negative impact on net profit.
Investment suggestion: first of all, we are optimistic about the future growth potential of the company. The company is expected to continue to benefit from the improvement of industry concentration. Secondly, the company is on the eve of a period of rapid growth. The company raised funds and vigorously expanded its stores. Although the performance was temporarily dragged down by new stores and secondary new stores, with the maturity and volume of new stores, the effect of store expansion will be reflected, and the performance growth rate is expected to exceed expectations. Finally, we are optimistic that the company is expected to usher in “double click” after the painful period of expansion. We predict that the net profit attributable to the parent company from 2022 to 2024 will be RMB 324 / 419 / 531 million, the corresponding EPS will be RMB 4.66/6.03/7.63, and the corresponding PE will be 12 / 9 / 7 times. Maintain a “recommended” rating.
