Performance review
2021 results are in line with performance forecasts
The company's 2021 revenue fell 7 per cent year-on-year to 3.89 billion yuan, net profit fell 60 per cent to 480 million yuan, and non-return net profit fell 60 per cent to 450 million yuan, in line with the performance forecast.
The revenue of the company's headquarters in 2021 was-42% to 810 million yuan compared with the same period last year, of which the combined income of brand integrated service business and distributor brand authorization business was-44% to 750 million yuan. In 2021, the GMV of the whole platform was + 8% to 43.5 billion yuan compared with the same period last year, of which the GMV of BABA, Pinduoduo, JD.com and Vipshop Holdings Limited was-13%, 56%, 5%, 34%, respectively, the growth of traditional search channels BABA and Vipshop Holdings Limited turned negative, the growth of JD.com slowed down, and the GMV of Douyin & Kuaishou Technology platform reached 1.98 billion yuan, accounting for 5%. The company monetization rate in 2021 was-1.6ppt to 1.7% compared with the same period last year, mainly due to the decline in customer profitability of traditional search channels, especially the decline in GMV of BABA channel, which has a high monetization rate.
The revenue of time interconnection in 2021 was + 11% to 3.08 billion yuan compared with the same period last year, and the net profit was-13% to 100 million yuan compared with the same period last year. In 2021, the Internet became the head of information flow advertising, Jinri Toutiao and Kuaishou Technology's KA effect advertising agency, realizing full coverage of mobile media and information streaming media.
Year-on-year gross margin in 2021-12.7ppt to 22.1%. We believe that this is mainly due to a reduction in the share of income from modern services with high gross margins. The rate of sales and management expenses increased from + 1.4ppt to 6.7% compared with the same period last year, mainly due to: 1) the increase in new business development and advertising investment; 2) the expiration of social security epidemic relief in 2021; and 3) the increase in professional service fees due to trademark protection and new investment demand. The increase in the provision for bad debts of accounts receivable resulted in a credit impairment loss of + 105% to 120 million yuan compared with the same period last year, and the net profit margin was from-16.2ppt to 12.3% year-on-year.
Prepaid accounts and other receivables increased significantly, while operating cash flow declined significantly. Prepaid accounts / accounts payable compared with the same period last year + 68%, 37% to 420 million yuan, mainly due to the increase in demand for prepayments due to the adjustment of media credit policy. Other receivables increased 67 per cent to 100 million yuan compared with the same period last year, mainly due to the proposed acquisition of Baijiahao. Operating cash flow fell 60% to 380 million yuan compared with the same period last year, mainly due to the decline in the revenue scale of brand integrated services and the increase in the business scale of mobile Internet media delivery platform led to an increase in procurement expenditure.
Trend of development
The company acquired 78 good series trademarks such as BASICHOUSE at the beginning of 2022, and we believe that it is expected to further expand the product and brand matrix to cover all-age consumer groups and meet individual needs.
Profit forecast and valuation
Taking into account the slowdown in channel income growth and the decline in structural gross profit margin of BABA, the 2022 EPS forecast was lowered by 32% to 0.29 yuan, and the 2023 EPS forecast of 0.35 yuan was introduced. The current stock price corresponds to 13 times 2022e/23e Pmax E, maintaining a neutral rating. Taking into account the decline in the valuation center of A shares, the target price was lowered by 36% to 4.99 yuan, corresponding to 17 times 2022 pound 23 Pmax E, with 14.8% upside space.
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.