Incident: Yi Yatong published its 2022 annual report. The company achieved operating income of 85.04 billion yuan, +21.6% year on year; achieved gross profit of 3.99 billion yuan, and net profit of the mother was 260 million yuan. By business, revenue from distribution+marketing business, cross-border and logistics business, and brand operation business was 787.4, 37.2, and 3.31 billion yuan respectively, accounting for 92.2%, 4.4%, and 3.9%, compared with +20.9%, +92.1%, and -6.0% over the same period last year.

The transformation of the industry into a comprehensive service provider has reached an unprecedented level of importance. With the continuous influx of new companies, competition in traditional supply chain services intensified, and the industry gradually transformed into a comprehensive service platform with three-dimensional, omni-channel, integrated marketing, and brand incubation. In the face of major changes that have not occurred in 100 years, China attaches great importance to the safety of the industrial chain supply chain, and the importance of the industry has risen to an unprecedented level. The draft National Economic and Social Development Plan 2023 states that it is necessary to speed up the construction of a modern industrial system, and once again emphasizes the need to focus on “the level of resilience and safety of the industrial chain supply chain.”

Brand operation, ecosystem, and digital capabilities are the company's core competencies. Brand operation: The company's brand operation management team has rich brand operation experience, strong market development ability and marketing model innovation ability. The revenue CAGR has reached 26.6% since the launch of the brand operation business; Ecosystem: By building a logistics ecosystem from online to offline, the company integrates a logistics ecosystem with a large number of suppliers and terminal outlets to form a competitive barrier; Digital capabilities: Based on more than 25 years of experience in supply chain informatization development, combined with leading technology at home and abroad, the company has independently developed to meet the characteristics of the supply chain industry and meet various business models The required big data management system.

Revenue and profit resilience are good, and the results of cost reduction and efficiency are remarkable. Revenue and profit showed good resilience. In 2022, operating income increased sharply by 21.6% year on year, and net profit of the mother fell to 260 million yuan, but it was still higher than the level in 2018. The company's expense management and control results have continued to show. In 2022, the management expense rate decreased by 0.5pp to 1.6%, and the financial expense ratio decreased by 0.3 pp to 1.7%; the restructuring of the company's business structure led to an improvement in operating efficiency, and the net operating cycle declined steadily from 109 days in 2018 to 73 days in 2022. The obvious decline in profitability in the current period was mainly due to the decline in net sales interest rate under the influence of the pandemic. ROE fell sharply by 4.2pp to 2.9%, but it was still higher than 1.5% in 2019. The ROE bottom period has passed.

Profit forecast and investment advice: We expect the company's revenue to grow steadily. We expect the company's EPS to be 0.17, 0.24, and 0.29 yuan respectively in 2023-2025, and the corresponding PE is 33, 23, and 20 times. The average PB-LF value of comparable companies is 1.9. In 2023, the company's net assets are predicted to be 3.55 yuan per share, corresponding to the target price of 6.75 yuan. First coverage, giving a “buy” rating.

Risk warning: consumption recovery or falling short of expectations, risk of market competition, risk of exchange rate fluctuations, etc.