occurrences

On April 28, 2023, Beinbeauty released its 2022 annual report and 2023 quarterly report.

Key points of investment

Profits are under pressure in the short term, and improvements are expected to accelerate

Total revenue for 2022 was 2,655 million yuan (same increase of 4.53%), net profit attributable to the mother - 176 million yuan (same decrease of 340.06%), due to factors such as poor operation of associated enterprises, procurement defaults, and preparation and accounting of bad accounts receivable accounts, after deducting non-net profit - 213 million yuan (same increase of 26.29%). The total revenue of 2022Q4 was 237 million yuan (down 73.07% from the same period), and net profit of the mother was -202 million yuan (same decrease of 737.2%). Total revenue of 2023Q1 was 717 million yuan (same increase of 3.04%), and net profit of the mother was 102 million yuan (same decrease of 39.13%), due to increased exchange losses.

The gross margin of 2022/2022Q4/2023Q1 was 43.37%/48.11%/43.27%, -4/+12/-2pct year-on-year, due to increased product sales discounts and rising prices of some raw materials. The net interest rate was -6.2%/-33.85%/1.93%, compared to -9/-38/-1pct. This was due to drag on gross margin and increased cost investment. The sales expense ratio was 30.94%/38.58%/28.69%, compared to +1.6/+16/-1pct, due to increased investment in advertising expenses. The management fee rate was 6.42%/7.27%/6.58%, compared to -1.3/+0.4/-0.4 pct over the previous year. Net cash flow from operating activities in 2022/2022 Q4/2023Q1 was $377/0.73/24 million respectively, +53%/-53%/-55%, respectively.

The product matrix is expected to be rich, and new retail channels will be strengthened

By product, the revenue for milk/rice powder/other categories in 2022 was 22.76/0.15/363 million yuan, +8%/-16%/-10% year on year, accounting for 86%/0.6%/14%, gross profit margin 48%/11%/16%, and -6/19/+6pct year on year. The company continues to change the Champion Baby series nutritional rice noodle/rice paste, the Tong Zhen series of milk-based nutritional products, and focuses on developing more special medical formula. It is expected to expand the product matrix through new product development. At present, the company has completed 10 key series and 30 new national standard registrations for 30 products. By channel, in 2022, dealer/direct supply customer/e-commerce/general underwriter/underwriter/other/other business revenue was 8.42/1.89/4.37/4.06/4.31/0.37/314 million yuan, compared to -8%/+104%/+11%/-5%/+31%/+179%/-14%, accounting for 32%/7%/16%/15%/16%/16%/1%/12%. The company upgraded a new digitally intelligent retail platform, reconstructed channels and restructured the system, implemented global marketing scenarios, and distributed tens of thousands of retail terminals across the country. By the end of 2022, the company had 1,787 dealers, an increase of 261 over the beginning of the year. Looking at the volume and price breakdown, milk powder sold 20,500 tons in 2022, +20% compared to the previous year, sales of rice noodles/other categories were 311.61/46.28 tons, -12%/-76% year on year. The corresponding ton price was 11.10/4.91/784661 million yuan/ton, -10%/-5%/+274% year on year.

Profit forecasting

Currently, the company is in a difficult reversal stage. Ke Ruixin continues to increase volume, and marginal improvements are accelerating. The 2023-2025 EPS is expected to be 0.27/0.68/1.10 yuan respectively, and the current stock price corresponding to PE is 16/7/4 times respectively, maintaining the “buy” investment rating.

Risk warning

Macroeconomic downturn risks, risks of rising raw materials, new product promotion falling short of expectations, etc.