\u3000\u3000 Syoung Group Co.Ltd(300740) (300740)
Recommendation logic: with the rapid development of China's cosmetics market, local brands also began to emerge. Syoung Group Co.Ltd(300740) has grasped the wave of online development. With the help of mask, this product has achieved rapid growth. In the past 2014-2017 years, the company's performance has increased by more than 60%. In the context of the rapid growth of the scale of China's cosmetics market, the company upgraded its brand image, diversified and expanded new categories and new brands, and its own brand business was reborn; In addition, the company exported brand operation experience and steadily expanded its agency business. Driven by its own brand and agency business, the company is expected to continue to grow steadily.
From the first brand of the mask to the comprehensive beauty carrier. Historically, with the help of the electricity supplier bonus, the main brand of the company has become the first brand of mask sales. With the entry of China's brand, the competition in mask industry is intensified. The superimposed e-commerce dividend gradually weakened, and the company's main business operation began to fluctuate. In 2019, the company will accelerate internal adjustment. In terms of independent brands, on the one hand, yunifang, the main brand, was transformed and upgraded, on the other hand, HPH, its own medical beauty brand, was launched to continuously enrich the brand matrix. In terms of agency business, on the basis of the original agency brand, it has obtained the agency right of new brands such as Kiko and Albion. Driven by the dual line of independent brand and agent brand, the company's operation began to recover from Q4 in 2019. The company recently released the performance forecast, and it is expected to realize the net profit attributable to the parent company of 230-265 million yuan in 2021, with a year-on-year increase of 64% - 88.9%.
The old brand is rejuvenated and the product operation is improved. The company actively seeks change, strengthens brand matrix construction and brand tonality upgrading. At present, the company has preliminarily built a brand matrix including "yunifang", "xiaoconfused", huayaohua, dashuidi, Yuman and HPH. In 2020, the main brand yunifang will be comprehensively upgraded from core to appearance, stand out with new brand image and brand culture, and further expand the target consumer group. In terms of products, the company has gradually expanded from a single category to many categories, such as water cream, color makeup, personal care and cleaning. Since 2017, the dependence of the company on mask category has gradually decreased. By 2021h1, the company's revenue of water cream category had increased to 51%. In addition, the company continues to innovate and upgrade on the basis of existing products, and creates popular single products with brand representative by virtue of rich technical reserves and strong single product incubation ability. The new product iteratively optimizes the product mix, eliminates the inefficient SKU by superposing the company's large single product strategy, promotes the proportion of explosive products, improves the product operation, and optimizes the profitability of the superior category mask. In 2020, the gross profit margins of the company's patch and non patch mask were 54.6% and 73.6% respectively, up by 4.9pp and 9.9pp respectively.
Export operation experience and steady development of agency business. Since 2015, the company began to try to help international brands enter the Chinese market, and the agency business came into being. In 2017, the company reached cooperation with Dr. Chengye, the first cosmetics brand in Japan, and successfully created the first popular product labo pore shrinking water; In 2018, the independent open platform "Shuiyang international" was launched to provide a complete set of solutions for overseas brands in the Chinese market and further cooperate with international brands such as Kiko and Albin. Thanks to the successful reshaping of Dr. Chengye's brand in China, the company reached strategic cooperation with Johnson & Johnson Group for the first time in 2019 and successively undertook key brands such as Li shidelin and Neutrogena under Johnson & Johnson. The company continues to provide full link operation for overseas excellent brands and continuously expand international agency business. By June 2021, the company has reached business cooperation with more than 30 international brands.
Profit forecast and investment suggestions. We expect EPS to be RMB 0.59/0.90/1.39 from 2021 to 2023 respectively, and the compound growth rate of performance in three years is expected to reach 59.6%. With the renewal and upgrading of the company's own brand, the improvement of product operation and the steady development of agency business, the company is expected to achieve steady growth. Referring to the valuation of comparable companies in 2022, we give the company a valuation of 25 times in 2022, with a corresponding target price of 22.5 yuan. It is covered for the first time and given a "buy" rating.
Risk tip: industry competition intensifies, the cultivation of new categories and new brands is less than expected, and the growth of e-commerce channels slows down.
