1H22 performance is lower than we expected.
The company announced 1H22 results: revenue 620 million yuan, year-on-year-14.9%; net profit 47 million yuan, year-on-year-19.0%; deduction of non-return net profit 35 million yuan, year-on-year-29.1%. The impact of the domestic epidemic in the first half of the year exceeded expectations, and the company's performance was lower than we expected.
On a quarterly basis, Q1/Q2 revenue is 278 million yuan, 15.7% compared with the same period last year, and net profit from home is 0.13 million yuan, 25.6% respectively compared with the same period last year.
Trend of development
The epidemic affects income pressure. 1H22's revenue fell 14.9% from the same period last year, which we judged to be mainly affected by the COVID-19 epidemic in many parts of the country in the first half of the year. The sales channel of the company's indoor fitness equipment is mainly offline, the outdoor path equipment is all sold offline, and the display shelf products are also oriented to the brand's offline stores, so the domestic epidemic in the first half of the year, on the one hand, has a great impact on the downstream demand of the company's business, on the other hand, it also has a certain impact on the company's production and transportation, resulting in income pressure.
The gross profit margin has increased. The company's 1H22 gross profit margin increased by 0.6ppt to 29.2% year-on-year, with Q1/Q2 gross profit margin changing from + 3.0ppt/-1.3ppt to 29.0% and 29.3% respectively. In terms of period expenses, the company's 1H22 expense rate increased by 2.3ppt to 20.0% compared with the same period last year, of which the sales / management / finance / R & D expense rate changed from + 0.37ppt/+1.46ppt/-0.10ppt/+0.51ppt to 8.87%, 8.37%, 0.03% and 2.69% respectively, and the company further increased its R & D investment. Although the expense rate has increased significantly, the increase in gross profit margin and the increase in government subsidies partly affected the company's 1H22 homing net profit margin, which fell only slightly to 7.56% compared with the same period last year.
Long-term optimistic about the development space of the sports and fitness industry promoted by the policy, and pay attention to the progress of the company's channel upgrading and the impact of the domestic epidemic situation in the short term. 1) long-term: GWI predicts that the global sports and fitness industry will grow to US $1.1988 trillion with a CAGR of 10.2% from 2020 to 2025. China's fitness participation rate and per capita fitness expenditure still have much room to improve compared with developed countries. In recent years, the state has issued policies related to sports and fitness, such as the National Fitness Program (2021-2025). We believe that the policy will continue to promote the expansion of China's sports and fitness industry. Shu Hua, as a leading brand of sports equipment in China, is expected to enjoy the development dividend of the industry by virtue of brand and channel advantages. 2) short-term: the company continues to promote the transformation and upgrading of terminal stores, changing the stores from the original simple sales channel to a sports experience space with sales, experience and guidance as one. We believe that store upgrading is expected to improve the company's store efficiency. In addition, we suggest that attention should be paid to the impact of the domestic epidemic on terminal consumer demand.
Profit forecast and valuation
Considering the higher-than-expected impact of the domestic epidemic, we reduced the 2022 EPS income by 23.7% in 2023 to 1.760 billion in 2066, and reduced the 2022 in 2023 by 24.1% and 21.7% in 2023 to 0.30 and 0.36 respectively. The current share price corresponds to a price-to-earnings ratio of 32 times 2023 / 26 times earnings for 2022 Universe. Maintain an industry rating that outperforms. Based on the earnings forecast adjustment, the target price will be lowered by 20% to 12.40 yuan, corresponding to 42 times / 34 times earnings in 2023, which is 32% higher than the current stock price.
Risk.
Repeated outbreaks have led to fluctuations in demand and sharp fluctuations in raw material prices.