Brief performance review
10.27 The company announced revenue of 2,501 million yuan for 1~3Q21, an increase of 1.49%, net profit of 261 million yuan, an increase of 36.45%, after deducting non-net profit of 202 million yuan, an increase of 24.14%. Revenue increased 15.51%/-4.38%/-2.15% from 1Q21 to 3Q21, and net profit of the mother increased by 5.01%/49.06%/35.76%.
Management analysis
By business model, the brand marketing business grew rapidly: overall revenue declined in 3Q21. It is expected that the company mainly serves international brands, with the international brand “618” boosting overdraft Q3 sales; by business, retail revenue was 597 million yuan, a decrease of 1.80%; service revenue was 32 million yuan, a decrease of 15.82%.
Looking at platforms, Tmall accounted for a high share, and new channels were rapidly launched: 3Q21 Tmall's domestic/Tmall international revenue fell 11.66%/2.77%, accounting for 82%/4% respectively; others such as Douyin, Pinduoduo, and cross-border e-commerce increased 187.17%, accounting for 13%, up 5PCT from the first half of the year. Among them, 1Q~3Q21 Douyin opened 4/13/12 stores and Pinduoduo opened 3/0/0 new stores respectively.
The profit level of Q3 continued to rise: 3Q21 gross profit margin of 45.65% (+5.03PCT) mainly benefited from an increase in gross margin level of retail business; sales expenses ratio of 32.07% (+4.85PCT), management expenses ratio of 3.84% (+0.18PCT), R&D expenses rate of 0.74% (+0.42PCT); net profit margin of 8.70% (+2.43PCT). In addition to the increase in gross margin, Q3 also added 14.98 million yuan of fair value change income.
As the big promotion approached, inventory turnover slowed slightly; accounts receivable turnover slowed slightly: the number of inventory turnover days in 1-3Q21 was 162 days, a year-on-year slowdown of 44 days, mainly due to the increase in inventory during the Double 11 promotion; the number of accounts receivable turnover days was 13 days, a year-on-year slowdown of 3 days.
The “Double 11" pre-sale performance of the Tmall flagship store of the brand that operated was impressive: the first 14 minutes of the pre-sale of Furifonce sold over 100 million yuan, the first 5 minute pre-sale day of Fueru Deya surpassed the full day of last year, the star product three-phase hair growth serum sold more than 10 million in 2 hours, Avon's one-hour pre-sale exceeded last day, and Bacopin Spray sold 293,000 units in 5 hours. After operating on its behalf on 10.26, Sulwhasoo had cumulative sales of 699/429 million yuan on Tmall, ranking 6th and 13th in beauty.
Investment advice
The company expanded its brand/category/platform to begin the second growth stage, incubating its own brand Meiyitang, strategically investing in the emerging personal care brand Weilong Bathroom, and actively exploring the beauty brand field. Maintain the EPS forecast of 1.03/1.19/1.34 yuan for 21-23, corresponding to 23/20/18 times PE for 21-23, and maintain the “buy” rating.
Risk warning
Inventory impairment losses, loss of major international brand customers, marketing delivery falling short of expectations, etc.