Incidents:
The company released its 2022 annual report and the first quarter of 2023 report.
Comment:
The high base of disinfectant wipes put short-term pressure on performance. Profitability steadily rebounded in the first quarter. The company achieved operating income of 667 million yuan in 2022, down 32.29% from the previous year, and achieved net profit of 141 million yuan to the mother, down 35.94% from the previous year. This was mainly due to the impact of the high base in 2021 and the sharp decline in sales of disinfectant wipes products by Clorox to major customers in 2022. The company's gross margin in 2022 was 31.47%, down 1.37 pct from the previous year. The sales/management/R&D expenses ratio was 1.07%/5.28%/3.79%, respectively, up 0.37/2.53/0.1pct from the previous year, and the net interest rate was 21.15%, down 1.2 pct from the previous year. In the first quarter of 2023, the company achieved revenue of 128 million yuan, a year-on-year decrease of 29.24%, a year-on-year net profit of 37.2707 million yuan, a year-on-year decrease of 21.45%, a gross profit margin of 37.60%, an increase of 4.47pct over the previous year, a net profit margin of 29.16%, an increase of 2.89pct over the previous year, and profitability rebounded.
The scale of the laundry business is beginning to take shape, and the release of production capacity is expected to open up space for growth. Looking at the business segment, the company's wet wipes and mask products achieved revenue of 589 million yuan/57.5434 million yuan respectively, down 34.50%/19.73% from the previous year, and gross margin was 27.71%/53.32% respectively. In 2022, the company added a new line of laundry products and achieved revenue of 2.184,900 yuan, with a gross margin of 39.65%. In terms of capacity utilization, the company's capacity utilization rate for wet wipes, face masks, and toiletries in 2022 was 71.13%/88.73%/14.09%, respectively, and the washing production line is still climbing.
Research, production, and marketing lay out a comprehensive cosmetics circuit, creating the second-largest growth phase, and putting the company into operation a nursing product project with an annual output of 3,000 tons in 2022, and set up a joint venture with Chuangjian Medical to lay out collagen. The cosmetics business covered membrane products to care products, and from “makeup brand” products to “equipment brand” products with higher added value. On the R&D side, the company added the Shanghai R&D Center and the Dachengshan Special Plant Planting and Extraction Project, and initially formed a “one base, three centers” business layout integrating R&D, production and marketing, which is expected to continue to empower the growth of the cosmetics business.
Investment advice and profit forecasting
The company is a leading wipes manufacturer in China, entering the cosmetics circuit to lay out recombinant collagen. We expect to achieve net profit of 157/188/216 million yuan in 2023-2025, and EPS of 1.93/2.31/2.66 yuan respectively, maintaining the “buy” rating.
Risk warning
Risk of increased competition in the industry, risk of cosmetics business expansion falling short of expectations, risk of project commissioning falling short of expectations, risk of industry policy regulation