Incidents:
The company announced its 2022 mid-year report, with revenue of 465 million yuan, +13.56% year on year, net profit of 20.9693 million yuan, an increase of 47.24%, and an overall dilution of EPS of 0.02 yuan, in line with expectations.
Commentary:
Q2 Revenue side performance was steady, and major brands grew well
The epidemic spread mostly in the first half of the year, especially in April and May. Under this influence, the company's revenue growth rate in Q2 slowed by 1.56 pct compared to Q1. However, it still achieved a relatively steady increase of 12.86%. By brand, “Pathfinder” achieved revenue of 375 million yuan, +18.55% over the same period last year, and accounted for +4.46pct in the outdoor products business compared to last year. While achieving good growth, it also indicates the further implementation of the company's focus on its main business strategy.
Optimize the brand structure and look forward to “focus” on strength
The wholly-owned subsidiary terminated the licensing agreement with the DX brand in May, mainly due to the fact that “DiscoveryExpedition” was unprofitable in recent years, and semi-annual revenue declined 13.23%. We believe that in order to accelerate brand structure optimization and cope with the pressure brought about by the epidemic, the company increased product promotion efforts in the first half of the year, resulting in a gross margin of -5.53% for outdoor products compared to the previous year, but it also contributed to an increase in inventory turnover. The company has strengthened promotion and interactive communication with community fans through new models such as “live streaming, influencers, and knowledge”, and has developed business cooperation with professional MCN organizations. It is worth looking forward to future brand development.
There has been an increase in franchise stores, and the efficiency of direct operations has declined. The number of direct-run stores/franchise stores of new chip development customer companies changed by -9 home/+8 compared to the end of last year. The revenue of a single directly-managed store was -15.01% year on year, of which the efficiency of mature stores decreased by 18.97%; the efficiency of single franchise stores decreased by +66.99% compared to the same period last year. In terms of chip business, the company reached cooperation with Israeli wafer supplier TowerJazz in the first half of the year, and has completed the streaming and delivery of related products. Mini LED driver chips have expanded to more than 10 domestic customers, including Conca, Whitaker, and overseas Ledaz and Tovis. Pressure touch chips have cooperated with overseas Partron companies to supply the e-cigarette business.
Investment advice and profit forecasting
Considering the company's deepening strategy and benefiting from the high outdoor boom, new chip customer development was implemented, maintaining the 22-24 EPS forecast of 0.08/0.20/0.27 yuan, corresponding to PE 103/41/31 times, and maintaining the “increase in holdings” rating.
Risk warning
Repeated epidemics; channel expansion fell short of expectations; new business integration fell short of expectations; exchange rate fluctuations.