Events: 1) 2022Q1, the company achieved revenue of 715 million yuan / year-on-year-5.34%, net profit of 13 million yuan / year-on-year-71.47%, deduction of non-return net profit of 12 million yuan / year-on-year-73.05%, gross profit margin of 35.32% / year-7.32pct, net profit rate of 1.76% / year-4.11pct.

Revenue declined compared with the same period last year, mainly due to: 1) the Ponzi and Vaseline brands operated by the company were distributed in 21Q1 and 22Q1 was changed into a consignment mode, which led to a decline in operating income; 2) since March, Shanghai and some other provinces and cities have been affected by the epidemic, the impact of logistics supply chain and the decline of consumer demand, resulting in a decline in operating income.

In terms of financial indicators, 1) profitability: 22Q1 achieves gross profit margin of 35.32% / year-7.32pct, net profit rate of 1.76% / year-on-year-4.11pct; period rate, cost control ability improved, sales rate 21.72% / year-4.37pct, management rate 4.50% / year-on-year + 0.59pct, R & D rate 0.44% / year-on-year + 0.01pct, financial rate-0.28% / year-on-year + 0.21pct 2) Company cash flow: 22Q1 realized operating net cash flow of-328 million yuan, a decrease of 51 million yuan compared with the same period last year, mainly due to the payment of more brand square payments and 2021 income tax expenses.

The company is a domestic head beauty operator with multi-brand resources and multi-channel operation capabilities. we are optimistic about the repair of the supply chain and the rebound of demand after the mitigation of the epidemic. We estimate that the return net profit of the company from 2022 to 2024 is 4.16,4.71 and 518 million yuan respectively, and the EPS is 1.04,1.17,1.29 yuan per share, respectively, and the PE corresponding to the closing price on April 27, 2022 is 13.7,12.1 and 11.0 times, maintaining the "prudent overweight" rating.

Risk tips: policy risks, intensified market competition, downstream customer loss, and so on.