Revenue in '22 and 23Q1 fell 21% and 42% year on year. The net profit of the mother was a loss, and Qingsong Co., Ltd. published its 2022 annual report and the first quarter of 2023. The company achieved revenue of 2,917 million yuan in 2022, a year-on-year decrease of 21.01%, net profit of -742 million yuan, a year-on-year decrease of 18.56% year-on-year, after deducting non-net profit of -759 million yuan, the loss margin narrowed 17.05% year-on-year, and EPS was -1.44 yuan. Profit-side losses in '22 were affected by a decline in gross margin, an increase in expense ratios, and plans to account for significant goodwill impairment of $453 million by Tino Sbel.
On a quarterly basis, the company's revenue for the 22Q1-Q4 quarter declined 19.67%, 30.93%, 3.71%, and 24.63%, respectively. The net profit of the mother was a loss for each quarter. In 23Q1, the company achieved revenue of 397 million yuan, a year-on-year decline of 42.22%, the net profit of the mother was 47.92 million yuan, and the loss margin narrowed 21.69% year on year.
Revenue from the cosmetics business and turpentine deep processing business in '22 fell 17% and 30% year on year. Looking at the latter's 23Q1 business segment: cosmetics manufacturing business (Northbell) and turpentine deep processing business accounted for 72% and 28% of revenue respectively in '22. Revenue declined 16.72% and 30.09%, respectively. Among them, Northbell achieved operating profit of 276 million yuan and net profit of 230 million yuan. The pressure on performance was mainly due to a decline in consumer demand for cosmetics. At the same time, demand for wipes in overseas markets weakened, shipping prices remained high, and overseas customers suspended delivery of goods after the production of some wipes and did not confirm revenue. Furthermore, the decline in gross margin in the cosmetics industry increased pressure on the profit side. In 23Q1, Northbell achieved revenue of 395 million yuan, a year-on-year decrease of 9.65%, operating profit of 5.117 million yuan, and Guimo's net profit of 44.26 million yuan. The turpentine deep processing business achieved operating profit of -66.2 million yuan in '22, mainly due to the year-on-year decline in sales and prices of major products. The company completed the divestment of the business in 23Q1.
By product, the main product of the cosmetics business, the mask, skin care, and wet wipes series accounted for 30%, 23%, and 13% of total revenue respectively. Revenue fell 13.99%, 9.00%, and 34.10%, respectively; the main product of the turpentine processing business was synthetic camphor, which accounted for 22% of total revenue, and revenue fell 34.15% year over year.
Gross margin declined, expense ratio increased, and net operating cash flow increased
Gross profit margin: The 22-year gross margin fell 7.34PCT to 5.66% yoy, and 23Q1 fell 2.78PCT to 2.51% yoy. By business, the gross margins of the cosmetics business and turpentine business in 22 were 4.92% (-5.52PCT) and 7.54% (-10.91PCT), respectively. Among them, the decline in gross margin in the cosmetics business was due to a decline in the profit margin of some products due to a decline in industry sentiment, a decline in orders for wet wipes series products due to the saturation of overseas demand, a further increase in depreciation and amortization in '22, which led to a further increase in depreciation and amortization in '22 due to the completion and commissioning of a production line renovation and expansion project in '21, and an increase in the purchase price of raw materials.
Expense rate: The cost rate for the 22-year period increased 2.45PCT to 13.73% year-on-year. Among them, the sales, management, R&D, and finance expenses rates were 1.53% (-0.06PCT), 6.74% (+1.73PCT), 4.18% (+0.81PCT), and 1.28% (-0.03PCT), respectively. The cost rate increased 2.77PCT year-on-year during the 23Q1 period, mainly due to the increase in the management fee rate.
Net operating cash flow increased 670.74% year-on-year to 341 million yuan in '22, mainly due to a decrease in inventory in the cosmetics business, optimization of production processes and streamlining of production personnel, payment of employee remuneration, and the reduction in various taxes paid; 23Q1 decreased 69.60% year-on-year, mainly due to the release of atomic company Qingsong Chemical.
Lower profit forecasts and maintain a “neutral” rating
The company's performance in '22 was affected by many factors. In 23Q1, the company completed a 100% equity transfer of two wholly-owned subsidiaries of turpentine deep processing business, Qingsong Chemical and Hong Kong Longsheng. In the future, it will focus on cosmetics and big consumption.
Considering that there is still uncertainty in the operating environment, the company's 23-24 profit forecast was lowered (the net profit returned to the mother was 58%/25% lower than the previous profit forecast, respectively), the corresponding EPS for 23-24 was 0.13 and 0.39 yuan respectively, and the 25-year profit forecast was added. The corresponding 25-year EPS was 0.56 yuan, and the 23-year PE was 45 times and 15 times, respectively, maintaining the “neutral” rating.
Risk warning: consumption is weak, orders for the cosmetics manufacturing business fall short of expectations; raw material costs have risen sharply.