This report is read as follows:
22Q3 cosmetics contract manufacturing business income and profits are under pressure, fully taking into account the loss of goodwill impairment of 453 million yuan. In the future, the company plans to divest the turpentine business, while Northbell shareholders plan to increase their shares, and the governance structure can be improved.
Main points of investment:
Investment recommendations take into account the full provision of impairment of goodwill, and the overall consumer market pressure, reduce the 2022-2024 EPS forecast to-1.27 (- 1.52) / 0.17 (- 0.15) / 0.42, with reference to comparable companies to give 2024 17x PE, downgrade the target price to 7.14 yuan, increase the holding rating.
The performance is lower than expected and the impairment of goodwill is fully taken into account. The revenue / return / deduction non-net profit of 2022Q1-3 company is 21.42 million yuan respectively, which is-20%, 654% and 681% compared with the same period last year. The single 22Q3 revenue / return / deduction non-net profit is 7.26 million yuan, which is-4%, 704%, 689%, respectively. The main factor company, Northbell Q3, deducts 453 million yuan from goodwill impairment (goodwill is 0 after deduction). Excluding goodwill impairment, Q3's return profit is estimated to be-46 million yuan, and the loss has narrowed. 22Q3's gross profit margin edged up 0.19pct to 4.88% year-on-year, still significantly lower than in normal years, mainly due to increased amortization of new capacity. The net cash flow generated by operating activities was 187 million yuan, which was significantly better than the same period last year.
Northbell orders improved month-on-month and are still under pressure from a year earlier. Northbell, which is the main contract manufacturer of cosmetics in 22Q3, has gradually entered the peak production season, and its revenue is expected to be the same as the same period last year, significantly better than Q2, but it is still in an ideal state under the background of declining industry prosperity and more cautious brand orders.
The profit side is still expected to have a small loss, but narrower than Q2.
It is proposed to issue additional shares to Northbell shareholders, and the improvement of the governance structure can be expected. On October 12, the company announced that it intends to issue shares to Mr. Lin Shida, the controller of Northbell in Hong Kong, with a proposed number of 7191.01-101 million shares at an issue price of 4.45 yuan per share. Lin Shida will become the actual controller of the company after the completion of the issue. at the same time, the company plans to divest turpentine business, and the governance structure can be improved.
Risk tips: raw material costs continue to rise, orders are less than expected, and important customers are lost.