Report introduction: In 2020, Lafangjiahua launched the T8 brand for young consumers in March, and is expected to launch the 2C pharmaceutical brand Sukinante in July, further enriching its own brand matrix. At the same time, it launched an equity incentive plan on 7/9, targeting e-commerce revenue of more than 500 million yuan in 2021, showing determination to develop. As the company's e-commerce grows and new brands are gradually launched, valuations will move closer to the cosmetics and cosmetics industry, with plenty of room to rise, covering the “buy” rating for the first time.
Key points of investment
Factors exceeding expectations: New brands and e-commerce channels have become the driving force for growth. 1) The market's impression of Lafang is often limited to Dazhong Daily Chemical and lacks new growth points, but in reality, in 2018, the company expanded its cosmetics business matrix (acting for German and Korean makeup brands), and launched the cutting-edge care brand T8 and the pharmaceutical brand Suante for the young consumer market in 2020, which were launched in March and July respectively, and continued to enrich the brand matrix. The two new private brands are expected to contribute 50 million revenue increases to the company in 20 years; 2) Equity incentives suggest high e-commerce growth indicators: as of 2019, Lafang Home Chemical's e-commerce revenue ratio was definitely 13%, absolute The value is 120 million, significantly lower than that of peers. The company announced an equity incentive plan on 7/9, focusing on motivating online business personnel. The departmental assessment indicators were an increase of 66.67%/168% to 206/552 million yuan in 2020/2021, providing new channel momentum for overall revenue growth.
A logical derivation path that exceeds expectations: In the past, investors' perception of the laundry market was mainly that the industry was mature, growth was slowing, and the pattern was stable, but in reality, in recent years, up-and-coming toiletries tickets, including Ziyuan and Mitani, have achieved further development through accurately positioned products+effective marketing. As a leading care provider with 20 years of experience, Lafang itself has solid product development capabilities and a mature supply chain system, and has invested in a number of high-quality MCNs in the beauty and maternal and child sector through direct investment or industrial fund participation in 2016, with the launch of the young care brand T8 and the pharmaceutical brand Ante, which launched in 20 years Product+ Camp The strength of the sales portfolio; in addition, in the past, the company did not pay enough attention to and motivate the e-commerce team. This time, equity incentives focused on examining the revenue growth of the e-commerce department, cooperating with the revitalization of old brands and the launch of new brands, and playing a growth combo punch.
Catalysts: The quarterly launch of e-commerce and the launch of popular products from new cosmetics and cosmetics brands.
Profit forecast and investment advice: It is estimated that in 2020/21/22, the company's revenue will increase 4%/35%/24% year on year to 10.1/131/1.60 billion yuan. The net profit returned to the mother will reach 0.6/1.0/1.5X, an increase of 29%/59%/44% over the previous year. Corresponding to PE valuation 65/41/28X, we believe that with the company's e-commerce growth and the gradual launch of new brands, the valuation will move closer to peers, covering the “buy” rating for the first time.
Risk warning: the risk of the epidemic affecting the retail environment; the risk that new brand expansion falls short of expectations; e-commerce development falls short of expectations