Event: on October 27, 2022, the company released its third quarterly report in 2022, with revenue of 4.696 billion yuan in the first three quarters, down 19.39% from the same period last year; net profit of 68 million yuan, down 77.57% from the same period last year; and net profit of 116 million yuan, down 46.46% from the same period last year.
Main points of investment:
Q3 income is under pressure, deducting high year-on-year growth in non-net profit. In the first three quarters of 2022, the company achieved revenue of 4.696 billion yuan, down 19.39% from the same period last year; net profit of 68 million yuan, down 77.57% from the same period last year; and net profit of 116 million yuan, down 46.46% from the same period last year. Of this total, Q3 achieved revenue of 1.543 billion yuan in the single quarter, down 17.96% from the same period last year; net profit of 55 million yuan, up 21.91% from the same period last year; and net profit of 100 million yuan, up 870.36% from the same period last year. The performance of Q3 company continues to be under pressure, which is expected to be mainly due to: 1) the sharp contraction of the global market and weak consumption under the macro background of the conflict between Russia and Ukraine and high inflation in the United States; and 2) the repeated epidemic situation in some parts of the country, offline consumption downturn and other factors. Q3 home net profit picked up sharply, which is expected to be mainly due to RMB exchange rate fluctuations, with the 2022Q3 RMB depreciating by 6.18% against the US dollar.
The domestic market for massage chairs is in the doldrums, and Singles Day is expected to promote Q4 revenue month-on-month improvement. According to Tonglian data, the sales of massage chairs on 22Q3 Tmall platform reached 1.417 billion yuan, down 16.20% from the same period last year, and the overall market performance was depressed. Looking forward to the fourth quarter, according to Magic Mirror data, massage chairs and massage small electricity achieved advance sales of 0.46 yuan and 10 million yuan respectively on the first day of pre-sale of Singles' Day in 2022, an increase of 28% and 143% respectively over the first day of 2021. Ao Jiahua achieved pre-sale volume of 6.3 million yuan on the first day, an increase of 22% over the same period last year. The good performance of Singles Day is expected to promote the company's Q4 revenue to usher in month-on-month improvement.
Gross profit margin continues to rise, and exchange gains improve the company's profitability. In the first three quarters of 2022, the company achieved a gross sales margin of 30.02%, a year-on-year increase of + 0.43 pcts. Among them, Q3 achieved a gross profit margin of 31.46% in the single quarter, a significant increase of 1.65 pcts over Q2, which is expected to be mainly due to the downward price of raw materials. In terms of period expenses, the financial expense rate in the first three quarters was-2.09%, which turned negative compared with the same period last year and significantly decreased by 3.46 pcts. The continued depreciation of the RMB exchange rate contributed to the company's performance flexibility. The rates of sales expenses and management expenses were 16.97% and 6.25% respectively, which were + 3.25,0.65 pcts respectively compared with the same period last year. In the end, the company recorded a net profit rate of 1.57% in the first three quarters, down 4.29 pcts from a year earlier.
Downgrade earnings forecast and maintain "overweight" rating. External macro factors have a great impact on the company's performance in the first three quarters of 2022. We downgrade our profit forecast for the company. It is expected that the net profit from 2022 to 2024 will be RMB 1.52, 3.34 / 452 million (the previous value is RMB 2.51). Compared with the same period last year, the corresponding price-to-earnings ratio is 34, 15 and 11, respectively. Taking into account the follow-up with the gradual recovery of the epidemic, massage chair market is expected to usher in a pick-up, driving the company's performance repair, maintain the "overweight" investment rating.
Risk hint: raw material price fluctuation risk, exchange rate fluctuation risk.