Performance review
3Q22 performance is lower than we expected.
The company announced 3Q22 results: revenue rose 14% year-on-year to 280 million yuan, homing net profit loss of 9.63 million yuan, the same period last year profit of 15.38 million yuan, lower than we expected, mainly due to the company's initiative to clean up secondhand inventory, terminal discounts to deepen the impact of gross profit margin, as well as the impact of the chip business.
Clearing product inventory and deepening sales discounts led to a year-on-year decline in gross profit margin. The company's 3Q22 gross profit margin fell 6.1ppt to 40.8% year-on-year, mainly because the company will terminate its cooperation with the DiscoveryExpedition brand at the end of 2022 and take the initiative to clear inventory during the quarter, while actively promoting the sales of Pathfinder brand inventory, deepening retail discounts.
It also shows that Beijing Core can increase the rate of management expenses by 3.5ppt compared with the same period last year, and inventory clearance led to an 11% year-on-year decline in inventory. Thanks to the company's active cost control, the rate of 3Q22 sales expenses fell 1.8ppt to 31.2% compared with the same period last year. The rate of management expenses increased to 11.6% from the same period last year, mainly because the company was dragged down by Beijing Core. Other income and investment income totaled 3.2 million yuan, compared with 11.29 million yuan in the same period last year, the decrease was mainly due to the decrease in special funds for industrial support received by the company during the period and the decline in investment income from trading financial assets. Net profit margin fell 9.6ppt to minus 3.4 per cent year-on-year. As of the end of September, the company's inventory was down 11% from a year earlier, mainly due to the company's active inventory clean-up. Accounts receivable increased by 56% compared with the same period last year, mainly due to the prolongation of the customer payback cycle under the influence of the epidemic.
The construction of channels continues to advance and strengthen the connection with consumers. The company continues to strengthen the construction of outdoor business channels, on the one hand, strengthen the fine management of offline stores, improve the success rate of opening new stores, and close inefficient stores, on the other hand, strengthen the layout of traditional e-commerce, such as Tmall and JD.com, and emerging channels such as Douyin live streaming, to provide consumers with omni-channel services and digital consumption experience. In terms of brand promotion, the company has newly signed well-known young performing stars to increase the exposure of brand spokesmen, and with the help of KOL talent and "knowledge marketing" to strengthen the promotion and interactive communication among the fans of the community.
Trend of development
The outdoor consumption enthusiasm of urban residents has gradually increased, and the sales of outdoor-related sports shoes and equipment have achieved rapid growth, and the company is also continuing to strengthen the R & D and design of outdoor products. According to Xinhuanet, on the first day of pre-sale of Tmall in 2022, pathfinder Tmall flagship store 1 minute 45 seconds advance sales exceeded the first day of pre-sale last year.
Profit forecast and valuation
Considering the adverse impact of the epidemic on sales and the cultivation of the company's chip business, the 2022 EPS forecast for 23 years was lowered by 24% 16% to 0.06 pounds 0.15 yuan. The current share price corresponds to 4.4 pounds 3.3 times 2022 pounds 23 Pamp S, maintaining a neutral rating. Considering that the recent epidemic repeatedly led to the downward valuation of sports outdoor companies, the target price was reduced by 12% to 7.91 yuan, corresponding to 3.7 times the 2023 Pmax S, with 13% upside space.
Risk.
The epidemic continues repeatedly, the terminal retail environment is not as expected, and the development of new business is not as expected.