Revenue grew steadily, with direct sales as the main source of revenue: the company's operating income increased from 1.283 billion euros in fiscal year 2016 to 1.538 billion euros in fiscal year 2021, with a compound annual growth rate of 3.7 percent.
The gross profit margin is under short-term pressure and the long-term trend is excellent: affected by the epidemic, the company's gross profit for fiscal year 2021 fell 4.8% year-on-year to 1.277 billion euros. In the first half of fiscal year 2022, thanks to the weakening impact of the epidemic and the reopening of offline stores, the company's gross profit increased 9.6% year-on-year to 555 million euros. The company has an excellent long-term gross profit margin, which is higher than 80% in the past ten years.
The cost has been relatively stable for a long time, and the annual net profit has reached a new high: in the long run, the proportion of the company's cost to revenue is stable at 83% and 90%. In fiscal year 2021, employee welfare expenditure and rent accounted for 24.2% and 5.8% of revenue respectively, showing a downward trend. In fiscal year 2021, the company's net profit reached an all-time high of 157 million euros, mainly due to the growth of sales in online channels and lower distribution expenses caused by the decline in offline stores.
The cost of sales has been properly controlled for a long time, and the interest-bearing debt ratio has fallen back to a reasonable level: the company's cost of sales has been well controlled, with a perennial ratio of 16% to 18% of revenue. The company's interest-bearing debt ratio rose sharply to 65.7% in fiscal year 2019, mainly due to an increase in borrowing resulting from the acquisition of ELEMIS. By the first half of 2022, the company's interest-bearing debt ratio had fallen to 28.8%, returning to a historically reasonable level.
ROE rebounded year-on-year, and inventory turnover days remained stable for a long time: the company's ROE and ROA rose year-on-year in fiscal 2021, to 12.9% and 6.3%, respectively. The rise in ROE was mainly due to the increase in net interest rate from 7% in fiscal 2020 to 10.2% in fiscal 2021. In fiscal year 2021, the turnover days of inventory and accounts receivable were 282 days and 32 days respectively, which maintained a stable trend for a long time.
Profit forecast and valuation
We estimate that the company's operating income from 2022 to 2024 will reach 1.777 billion, 2.046 billion and 2.302 billion euros respectively, with a growth rate of 15.5%, 15.2% and 12.5%, respectively. Gross profit reached 1.443 billion, 1.651 billion and 1.851 billion euros respectively, up 13.0%, 14.4% and 12.1% over the same period last year. The net profit of homing reached 187 million, 233 million and 266 million euros, respectively, an increase of 21.0%, 24.6% and 14.0% over the same period last year.
Ou Shudan has become an international personal protection group with many brands through mergers and acquisitions in recent years. While the main brands remain sound, other brands are expected to bring a second growth curve for the company. With the deepening of brand integration in the future, profits are expected to continue to be released. At the same time, the rapid growth of the Asia-Pacific region, especially the Chinese market, will provide a broad growth space for the company. In the future, as the epidemic fades, the recovery in global consumption will bring opportunities for companies to rebound. Assuming that the exchange rate of the euro against the Hong Kong dollar is 8.8, the "prudent overweight" rating is given for the first time, with a target price of HK $36 and a price-to-earnings ratio of 32x, 25x and 22x for 2022-2024, respectively.
Risk hint
1) intensified market competition: fierce competition may lead to a lower than expected increase in the company's market share.
2) COVID-19 epidemic situation and other factors that may affect the macro environment: local outbreaks and other possible macro factors may affect the company's revenue.
3) the market acceptance of new products is lower than expected: the company's revenue growth may slow down.
4) Exchange rate movements: income may fall short of expectations
5) operational risk of overseas business: overseas markets are affected by the local political and economic situation, legal system and regulatory system, and overseas revenue may fall short of expectations due to the above-mentioned factors.