occurrences
The company released its 2022 mid-year report, achieving revenue of 1,793 million yuan, a year-on-year decrease of 32.82%; realized net profit of 220 million yuan, an increase of 198.69% over the previous year; and achieved net profit of 82 million yuan after deduction, an increase of 14.31% over the previous year.
Divestment of retail business revenue and increase in profitability
Revenue side: The decline in 2022H1 revenue was mainly due to 2022.4, when the company divested the retail business, which accounted for a relatively large share of revenue (61.76% in 2021), focusing on the Internet marketing business. The 2022 H1 retail business achieved revenue of 811 million yuan, and the Internet marketing business achieved revenue of 982 million yuan, an increase of 7.95% over the previous year. Mainly due to the impact of the epidemic, consumer demand shifted from offline to online.
In terms of gross and net interest rates: 2022H1's gross margin was 25.81% (+2.01pct), mainly due to an increase in the share of Internet marketing businesses with higher gross margins; 2022H1's net profit margin was 12.23% (+9.61pct), mainly because the company's sale of the retail sector confirmed investment income of 144 million yuan.
Change the main business and focus on internet marketing
In recent years, due to repeated epidemics and the diversion of online channels, the prosperity of the physical retail industry has continued to decline. In 2021, the Internet e-commerce business achieved a net profit of 120 million yuan, while the retail business suffered serious losses. The company's net profit was 17.031 million yuan. 2022. 4 companies completed the sale of 100% of the shares of 11 wholly-owned subsidiaries in the retail business sector to the controlling shareholder, Xinhuadu Group, through cash sales. After the retail business was divested, the company's main business changed from internet marketing business and retail business to internet marketing business.
Expand the category based on liquor to create C2B customized product category expansion: the company is deeply involved in liquor e-commerce services, has high-quality customers such as Luzhou Laojiao, Shuijingfang, and Xijiu. It is good at multi-channel operations such as JD, Tmall, Douyin, Vipshop, Pinduoduo, etc., and has continued to rank in the leading array of integrated liquor brand operators on e-commerce platforms for many years. Taking advantage of the operating advantages of liquor, the company gradually expanded into categories such as beverages, daily necessities, mother and baby, and household. C2B customized products: The company is rooted in cross-category, multi-channel and multi-model service capabilities. Based on in-depth consumer insight, the company cooperates with brands to develop C2B customized products, gradually forming a second growth curve for future company development.
Investment advice
In the short term, the company divested its retail business, which had serious losses due to the pandemic, and focused on the Internet marketing business, which is the main contributor to profits. Performance is expected to achieve greater flexibility. In the long run, the company's Internet marketing business has the advantage of operating through multiple channels such as Tmall, JD, and Pinduoduo. While deeply involved in liquor operations, it is expected to achieve steady growth by expanding new growth categories and developing its own brands. We expect the company's EPS from 2022 to 2024 to be 0.43, 0.24, and 0.28 yuan/share, respectively. Corresponding to the current stock price PE is 15, 27, and 23 times, respectively, to maintain the “buy” rating.
Risk warning
Category expansion fell short of expectations; industry competition intensified.