Horizontal and vertical expansion + full-link operation is expected to be the main trend of TP, and the demand for cosmetic services is stronger. We believe that the future development direction of agent operation service providers mainly includes 1) horizontal expansion: based on superior channels to enable brand digital upgrading, expand social e-commerce, content e-commerce and other new channels to bring new increments for the brand. 2) Vertical infiltration: condense their own channels, operations and sales capabilities, incubate their own brands, and delineate private territories. 3) full-link access: in addition to e-commerce operation, to provide one-stop, full-link services for brands. Compared with clothing and 3C home appliances, beauty products are more dependent on e-commerce services than other categories. According to iResearch, the proportion of demand for e-commerce services in beauty products is 50%, 60%, and the commission rate is 15%, 20%. Mainly due to the high consumption frequency of cosmetics, multiple categories and brands, fast product iteration and fierce competition in the industry, the demand for e-commerce services is high. And cosmetic products with a relatively high gross profit margin can pay a higher commission rate.
Distribution-oriented to enhance customer stickiness and reduce the risk of customer loss
The generation operation enterprises mainly cooperate with the downstream brands with the agent operation mode and sub / distribution mode or mixed mode. Among them, (1) in the generation operation mode, the agent operator has no commodity pricing power and no commodity ownership, and the operating cost is lower, mainly by collecting service fees, so the right to say about the brand is also low. (2) in the sub-distribution mode, the service party needs to obtain the authentic authorization of the brand.
First use their own funds to purchase goods from brand merchants for online sales, with commodity pricing power, commodity ownership, mainly earn the difference between purchase and sale. Therefore, the degree of participation in the brand is deeper, and the binding with the brand is closer. Beauty beauty makeup accounts for 92% of the distribution business in 2021, which is much higher than that of Yiwang Yichuang (23%) and Ruoyuchen (31%), so we think beauty beauty makeup has more advantages in terms of customer stability.
Expanding new channels + private brands is expected to contribute to the performance of the new incremental company while ploughing Tmall platform, actively expand Douyin, Xiaohongshu and other emerging channels, by the end of 2021, the company operates 33 Douyin stores. In 2021, the company's revenue from other platforms except Tmall reached 282 million yuan, 2019~2021CAGR was 876%, and the revenue share of other platforms increased from 0.1% to 6.8%. In terms of brands, it covers various categories of cosmetics, as well as countries such as Europe, America, Japan and South Korea. As of June 30, 2022, the company has entered into cooperative relations with more than 60 brands, including Sulwhasoo, Yayang, Hou, Swarcome, Furifang, Orenasu and Fuludeya. In addition, it also continues to develop new categories, laying out contact lenses, food, toys and other consumer categories. At the same time, the company has successively launched Mei Yitang, Yurong early, taste archives, Aibei Meng and other own brands to enhance brand autonomy by incubating their own brands.
Investment suggestion
In the short term, the performance is affected by the epidemic, and it is expected that the performance will be gradually repaired after the liberalization of the epidemic prevention policy; in the medium to long term, the distribution model has strong customer stickiness, the company is actively expanding Douyin and other emerging platforms, building its own brand, and is optimistic about sustained growth. We estimate that the EPS of the company in 2022-2024 will be 0.32,0.66,0.79 yuan per share respectively, and the corresponding share price PE will be 41,20 and 17 times respectively. Maintain a "buy" rating.
Risk hint
The quality of goods is difficult to control, the concentration of suppliers is high, and the market competition is fierce.