This report is read as follows:
The impact of the epidemic on the impairment of goodwill was superimposed, and the company lost a lot of money in 2022. In 2023, as cosmetics consumers gradually pick up, small and medium-sized factories are gradually cleared, and the cost of raw materials is superimposed downward, the company's revenue and profits are expected to usher in an inflection point.
Main points of investment:
Investment recommendations refer to the performance forecast, lower the 2022 EPS forecast to-1.36 (- 0.09), consider that consumption is expected to pick up after the peak of the epidemic in 2023, while the cost pressure is reduced, raise the EPS forecast for 2023-24 to 0.27 (+ 0.10) / 0.49 (+ 0.07) yuan, with reference to comparable companies to give 2024 20xPE, raise the target price to 9.8 yuan, maintain the overweight rating.
The epidemic affected the impairment of goodwill, and the performance hit bottom. The company issued a forecast of 2022 results, the annual revenue is expected to achieve 28-3 billion yuan, 24% compared with the same period last year. Home and deduction non-net profit is expected to be a loss of 6.8-780 million yuan and 7.08-808 million yuan respectively, mainly due to losses in cosmetics OEM and chemical business. And Northbell's large amount of goodwill is reduced by 453 million yuan.
Cosmetics market pressure + cost increase, Northbell performance under pressure. In 2022, Northbell, a subsidiary of the company's main cosmetics ODM, is expected to achieve a revenue of 20-2.1 billion yuan, a year-on-year-16% investment 20%, and a net profit loss of 2.2-260 million yuan, a sharp decline over the same period last year. It is speculated that mainly due to the disturbance of the epidemic, brands are relatively cautious in production orders, resulting in low capacity utilization of the company; at the same time, the prices of major raw materials for cosmetics continue to rise, resulting in a pressure on gross profit margin.
Chemical business divestiture, cosmetics business full provision of goodwill impairment, inflection point can be expected. As of January 2023, the company's two subsidiaries of "Qingsong Chemical" and "Hong Kong Longsheng", which are mainly engaged in chemical business, have completed the transfer, while Northbell has set aside 453 million yuan in goodwill impairment in 22Q3 (goodwill is 0 in the account after provision), and the financial end is light. With the peak of the epidemic infection in 2023, the terminal demand for cosmetics is expected to pick up, and the company's orders are expected to recover gradually. at the same time, the price of upstream raw materials has been adjusted back, the pressure on the cost side is expected to be alleviated, and the inflection point of the company's revenue and profit is expected.
Risk tips: raw material costs continue to rise, orders are less than expected, and important customers are lost.