Performance review
2021 and 1Q22 results are in line with our expectations
The company announced 2021 results: 2021 revenue 1.186 billion yuan, year-on-year-27.4%; return to the mother net profit of 40 million yuan, corresponding to 0.17 yuan per share,-81.4% year-on-year, in line with our expectations. In terms of quarter-to-quarter, 1Q/2Q/3Q/4Q21 revenue is + 6.1% CPM 38.7% CPM 45.5% CPMI 20.4%, and net profit returned to the home is-15.0% Rue 67.7% MAQ 94.3% / turn into losses. At the same time, the company announces 1Q22 results:
1Q22's income is 322 million yuan,-3.3% compared with the same period last year; the net profit from home is 1.96 million yuan, which is-95.1% from the same period last year. We believe that the net profit from home has dropped sharply compared with the same period last year, and the prices of major raw materials such as plush pulp, polymers and sea freight are still high, and the company has increased investment in brands, resulting in pressure on profit margins.
Trend of development
1. Adult incontinence products continue to be booming, with independent brands accounting for 33% of revenue. From the perspective of ① products, due to the shortage of overseas exports and the decline in the number of people born in China, the income from baby care products in 2021 was 612 million yuan,-34.8 percent last year, while the income from adult incontinence products and pet health products continued to grow, reaching 464 million yuan and 88 million yuan respectively in 2021, with year-on-year growth rates of 8.1 percent and 13.9 percent, respectively. According to the ② sub-sales model, ODM business revenue in 2021 is 778 million yuan, accounting for 65.6% of the total revenue (year-on-year-6.3ppt). If excluding the impact of epidemic prevention materials, ODM revenue is-28% year-on-year; independent brand business income is 391 million yuan, accounting for 33% (year-on-year promotion of 5.8ppt). If excluding the impact of epidemic prevention materials, independent brand revenue is + 6% year-on-year, and independent brand income and contribution continue to increase.
2. The increase in cost superimposes the increase in investment in independent brands and puts pressure on profitability. In 2021, the company's gross profit margin was 18.6%, year-on-year-9.2ppt, mainly due to a decrease in income from epidemic prevention materials such as masks with higher gross profit margins, rising raw material costs and higher sea freight prices to further suppress gross profit margins. 1Q22 gross profit margin is 12.1%, year-on-year-13.3ppt, month-on-month increase of 4.5ppt; expense rate increased 0.6ppt to 10.8% year-on-year, in which the sales expense rate increased 1.4ppt over the same period last year, mainly due to the increase in marketing expenses caused by the company's increased investment in independent brands; 1Q22 management / R & D / financial expense rate + 0.4/+0.3/-1.5ppt, respectively. Under the comprehensive influence, 1Q22 achieved a net profit of 1.96 million yuan,-95.1% compared with the same period last year, reversing losses compared with the previous month.
3. Pay attention to the construction of independent brand and the process of special canal development. On April 17, the company released the new IP image "reliable and dynamic elderly", while comprehensively updating product packaging and opening the road to brand marketing upgrading, we believe that the company is expected to continue to lead consumer education in the incontinence market and enhance brand value. In terms of channels, the company has continued to strengthen the construction of offline special canals since its listing and achieved initial results. We expect 1Q22 offline channel revenue to grow by more than 25% year-on-year. In 2022, the company plans to strengthen the online full-channel construction and continue to expand the special channel with the help of the brand. We believe that the company's comprehensive layout of online and offline all-channel coordinated development is expected to further consolidate the leading position of the industry.
Profit forecast and valuation
Taking into account the repeated impact of the epidemic, we reduced the net profit of 2022 Lexus by 26% of net profit in 2023 to RMB 132 million / 220 million, and the current share price corresponds to the price-to-earnings ratio of 30 / 18 in 2023. To maintain the outperform industry rating, based on the earnings forecast downgrade, we lowered our target price by 19% to 17.80 yuan, corresponding to a price-to-earnings ratio of 37 times earnings in 2022 / 2023, which is 23% higher than the current stock price.
Risk
Raw material price fluctuation risk; industry competition aggravates the risk; policy promotion is not as expected.
