Report guide
Lafang Jiahua announced an interim report that e-commerce is growing steadily, and a more reasonable sales cost investment plan led to a 17% increase in net profit after deducting non-return to the mother in the first half of the year. The cash flow performance was also very steady. The company is steadily implementing a development path focused on e-commerce and brand rejuvenation.
Key points of investment
Incident: The company announced its semi-annual results. Q2 revenue in 2020 increased 23% to 237 million yuan, and net profit of the mother reached 3.65 million yuan (370,000 yuan in the same period last year). The excellent performance in Q2 led to a decline in revenue in the first half of the year to 11.8%, and net profit after deducting non-return to the mother increased 17%.
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 Valued at 120 million yuan, significantly lower than its peers, the company announced an equity incentive plan on 7/9, focusing on motivating online business personnel, and proposed departmental assessment indicators for the 2020/2021 online revenue growth of 66.67%/168% to 206/552 million yuan, providing new channel momentum for overall revenue growth. Specifically, by the first half of 2020, the company's e-commerce revenue increased 10.7%, leading all channels.
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, emerging laundry brands, including Ziyuan and Mitani, have overtaken curves with precisely positioned products+effective marketing. As a leading care provider with 20 years of accumulation, 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 fields through direct investment or industry fund participation. The launch of young care brand T8 and pharmaceutical brand Ante products in 2020 will further develop products. + 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. At the same time, focusing on e-commerce and focusing on investment efficiency also effectively boosted the company's performance in the first half of the year.
Catalysts: The quarterly launch of e-commerce and the launch of popular products from new cosmetics and cosmetics brands.
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