3Q21 performance is lower than we expected.
The company's 3Q21 revenue was 1.11 billion yuan, down 2.8% from the same period last year; the net profit from home was 160 million yuan, down 46% from the same period last year, and the performance was lower than we expected because the GMV decline of BABA channel exceeded expectations. The cumulative income of 1-3Q21 was 2.77 billion yuan, up 0.1% from the same period last year, and the net profit from home was 400 million yuan, down 44% from the same period last year.
The 3Q21 income of the company's headquarters business was 188 million yuan, down 40.9% from the same period last year, mainly due to the decline in GMV in BABA channels, and the decline in integrated service revenue due to the great pressure of customer inventory. 1-3Q21 full-platform GMV 28.1 billion yuan, an increase of 23% over the same period last year, of which BABA, Pinduoduo, JD.com and Vipshop Holdings Limited GMV were-5%, 96%, 25%, 1%, 46%, 32%, 14%, 4%, respectively, of the traditional search channel BABA's GMV compared with the same period last year, Pinduoduo platform maintained rapid growth, JD.com channel growth slowed down, and the new content channels (Douyin, Kuaishou Technology) achieved GMV of more than 900 million yuan, accounting for 3.5%. In the third quarter alone, GMV increased by 6% to 9 billion yuan compared with the same period last year. We estimate that the monetization rate of 3Q21 has rebounded slightly from the previous year and declined by about 1.7ppt to 1.8-1.9% compared with the same period last year. We think it is mainly related to the decline in the GMV share of BABA channels with high monetization rates.
Time interconnected 3Q21 revenue was 926 million yuan, an increase of 11.9% over the same period last year.
3Q21 gross profit margin decreased by 8.9ppt to 20.2% compared with the same period last year, which is mainly due to the decline in the proportion of revenue from brand licensing business with high gross margin; the rate of sales and management expenses is year-on-year-0.6ppt and-0.5ppt, respectively; superimposing the company's pre-investment in newly expanded cross-border e-commerce and food projects and flood donation expenditure in Henan, 3Q21 net profit margin decreased by 11.3ppt to 14.1% compared with the same period last year.
There was a substantial increase in prepaid accounts and an increase in net operating cash outflow. As of 3Q21, the company's prepaid accounts increased by 83% to 450 million yuan compared with the beginning of the year, mainly due to the increased demand for mobile Internet media delivery business during the Mid-Autumn Festival and National Day, corresponding to the increase in the scale of pre-recharge; accounts receivable increased by 25% to 1.41 billion yuan compared with the beginning of the year. As of 3Q21, the net operating cash flow was 290 million yuan, down 495% from the same period last year, mainly due to the decrease in collection due to the decline in revenue from comprehensive brand services and the increase in payments due to the increase in the scale of factoring loans.
Trend of development
The company's management expects that with the advent of the peak e-commerce sales season and the gradual depletion of customer inventory, the company's revenue will increase in the fourth quarter.
Profit forecast and valuation
Considering the slowdown in the growth of BABA's channel income, we downgrade the 2021 EPS 2022 forecast of 34% to 0.29,0.43 yuan. The current share price corresponds to a price-to-earnings ratio of 16 times 2021e/22e. Maintain a neutral rating and lower the target price by 20% to 7.82 yuan, corresponding to 18 times 2022 price-to-earnings ratio, which has 9.5% upside from the current share price.
Risk
The operating rules of the e-commerce platform have changed, the growth of a single channel is not as expected, and the development of new business is not as expected.