I. Overview of events
According to the company's three-quarter report on October 26, the company's 2020Q1-Q3 realized operating income of 781 million yuan, an increase of 24.6% over the same period last year, and a net profit of 65 million yuan, an increase of 29.22% over the same period last year. Among them, Q3 realized revenue of 227 million yuan, an increase of 22.97% over the same period last year, and a net profit of 22 million, an increase of 54.41% over the same period last year.
II. Analysis and judgment
Q3 net profit is growing at a high speed, profitability is steady and good.
The company's net profit in the first three quarters was 65 million yuan / + 29.22%. Q3's net profit in a single quarter was 22 million yuan / + 54.41%, mainly due to the continuous growth of the original business. At the same time, the company pays close attention to the tuyere of live e-commerce and carries out live broadcast cooperation business with partners Mei Zanchen, Shancun, Calch, etc. In terms of profitability, the company's gross profit margin in the first three quarters of 2020 was 32.69%, up 0.26% compared with the same period in 2019. Q3 single-quarter gross profit margin was 37.83%, an increase of 3.43% over the same period last year, mainly due to the high bargaining power brought about by brand matrix optimization and scale expansion; from the inventory point of view, the company's 2020Q1-Q3 inventory was 245 million yuan, an increase of 41.65% over the same period last year, mainly due to the company's stock preparation for Singles Day.
Prepare for Singles Day, Q4 performance is expected to accelerate the release of Singles' Day in 2020 compared with last year's rule renovation, the battle front is lengthened, Tmall's activities are divided into two waves, and the overall time is 3 days longer than before. JD.com and Pinduoduo's activity process is basically the same as Taobian, providing brands with a "multi-channel + multi-frequency" layout and outbreak opportunities, especially for international brands affected by foreign epidemics and facing market shrinkage. The demand of international brands for online operation services is surging. With the rapid outbreak of brand incubation power, global high-quality brand resources and omni-channel sales network, the company is expected to grasp the dividend brought by Singles' Day, so it is expected that the company's performance will accelerate in the fourth quarter.
The cosmetics industry is highly prosperous, and the potential of mothers, infants and health products is promising. The acting operating companies are expected to benefit from this. The retail sales of cosmetics in July / August / September 2020 increased by 9.2%, 19% and 13.7% respectively compared with the same period last year. The growth rate is much higher than that of other categories in Social Zero. On October 25, the China population report 2020 of Evergrande Research Institute suggested that we should fully liberalize and encourage childbirth as soon as possible, speed up the construction of a fertility support system, and the maternal and infant market is expected to expand and upgrade again. Domestic and foreign brands have the incentive to join the market with the help of brand operators.
III. Investment suggestions
Based on the assumption that the company's e-commerce retail business can maintain steady growth and the revenue of brand marketing planning services is accelerating, we estimate that the company's corresponding EPS in 2020-22 will be 1.19pm 1.49pm 1.96 yuan and PE 38.8pm 31.0pm 23.6 times, lower than the overall valuation level of 53 times of the listed agent operating company in 2020, covering for the first time and giving a "recommended" rating.
Fourth, risk tips:
The sales of Singles Day were lower than expected, and the brand lost customers.