Event

The company released its semi-annual report of 2022: revenue of 703 million yuan / + 11.7%, net profit of 0.36 million yuan /-19.4%, net profit of 0.34 million yuan /-18.6%, net cash flow of 60 million yuan (- 54 million yuan in the same period last year) and EPS (basic) of 0.18 yuan per share, a decrease of 26.1% (weighted) to 4.60%/-2.02pct.

Brief comment

22Q2 revenue growth is faster, the proportion of gold categories increased under the gross profit margin, net profit margin decreased.

22Q2's revenue is 367 million yuan / + 36.1%, mainly due to the rapid growth of 618 online business.

The net profit of 22Q2 company is 1515.05 million yuan /-27.8%, which is mainly due to the increase in the proportion of gold jewelry with low gross profit margin. 22Q2 gross profit margin is 18.9%/-5.3pct and net profit rate is 4.04%/-3.73pct.

22H1 gold solid growth, jewelry revenue decline. According to the category, the repeated impact of the epidemic and the decline of the global economic trend in the first half of 2022, the income of 22H1 plain gold jewelry was 563 million yuan / + 20.8%, accounting for 80.1% of the revenue of plain gold jewelry, accounting for 80.1% of the revenue of plain gold jewelry 6.06%, and the revenue of mosaic jewelry was 13.6 billion yuan /-15.3%, mainly due to the repeated impact of the epidemic, the market demand for inlaid jewelry shrank.

Tmall, Pinduoduo and other e-commerce channels have increased rapidly, and 22H1 e-commerce accounts for nearly 30 per cent of revenue. From the perspective of different channels, 22H1 direct stores, e-commerce, counter, franchise and consignment realized revenue of 0.76,2.01,2.42,1.78 and 1 million yuan, which was + 8.6%, 73.9%,-11.8%, 8.3% and-27.8% compared with the same period last year. Among them, the proportion of online revenue is 28.7%/+10.25pct, and the company has comprehensively increased the scale of online sales through the deep cooperation of existing Tmall and other channels and the development of Pinduoduo channels. 22H1 Tmall channel revenue is 96 million yuan / + 919.7%; Pinduoduo channel revenue is 35 million yuan (only 40800 yuan in the same period last year). In the second half of the year, the company will continue to make efforts in e-commerce channels, especially in Tmall and JD.com channels.

The epidemic affects the pace of store opening, and shop opening is expected to accelerate in the second half of the year. As of June 30, 22, the company had 209 terminal stores, with 22 new stores, 19 closed stores and a net increase of 3 this year, mainly due to the operational difficulties caused by the epidemic and the survival of the fittest stores.

Among them, there are 28 direct stores (a net decrease of 1), 71 over-the-counter stores (a net decrease of 2) and 110 joining stores (a net increase of 6). The speed of exhibition stores is expected to accelerate in the second half of this year.

Cultivate diamond brand "Mucan" Tmall flagship store has been put on the shelves, the first offline store will be opened in the second half of the year. The company set up a joint venture company Mucan Jewelry in March 22 to develop and cultivate diamond business. Mucan's positioning is to create fashion jewelry for daily wear, and the target group is intelligent consumers who follow aesthetics and values and evaluate affordability. The company has completed the cultivation of diamond brand OWN SHINE Mucan brand incubation in brand concept, product design and carat number of marriageable people, including brand positioning, crowd portraits, vision, communication, merchandise, pricing, channel and retail strategy, VI, SI design, team formation, etc., and launched the Tmall flagship store in July. The company plans to open its first offline store in the second half of the year.

The release of the fixed increase fund-raising plan will further consolidate the main industry and promote the construction of diamond brands. In August 2022, the company plans to issue no more than 61.2 million shares (including capital) to specific targets, and the amount of funds to be raised does not exceed 716 million yuan. Among them, 288 million yuan is to be invested in the terminal construction project of "Mancalon @ Z concept Store", 340 million yuan is used in omni-channel jewelry integrated platform construction project, and 88 million yuan is used in "Mucan" brand and creative promotion project. Through this fund-raising, the company will integrate resources and open up channels to face the consumers of Generation Z, so as to enhance the competitiveness of the company and expand brand awareness and influence.

Profit forecast: based on the offline store opening pace and consumer demand affected by the epidemic, the company's profit forecast is lowered. The company's revenue in 2022-2024 is expected to be 15.7,19.9 and 2.54 billion yuan, an increase of 25.5%, 26.7% and 27.7%, respectively. The net profit of homing was 0.76,0.91 and 119 million yuan, up 7.6%, 19.8% and 31.1% respectively, corresponding to the PE of 46, 39 and 29x in 22-24 years.

Risk tips: the consumption boom is lower than expected, the expansion outside the province is not as expected, and the promotion of diamond brands is not up to expectations.