Shuyang Co., Ltd.'s 23&24Q1 profit exceeded expectations, and profit margins continued to expand. (1) 2023: Achieved revenue of 4.493 million/yoy -4.86%, net profit to mother of 294 million/yoy +135.42%, and profit growth exceeded expectations; gross margin was 58.44% /yoy+5.32pct, and the share of high-margin brands continued to increase; sales expenses were 478 million, and the sales expense ratio decreased slightly by 1.70% to 41.35%, mainly due to strengthened cost efficiency control; the management cost ratio increased slightly, R&D rates decreased slightly, and depreciation and renovation expenses increased. (2) 23Q4: Revenue of 1,116 million/yoy -19.14%. Unifang's revenue fell short of expectations, but gross margin was 59.72%, up 11.67% year on year. Ifidan achieved high growth, net profit to mother of 114 million, and net profit margin of 10.23%. (3) 24Q1: Revenue of 1,032 million yuan/yoy -1.36%, net profit to mother of 40 million/yoy -23.25%, deducting non-net profit of 53 million/ +45%.
The two businesses jointly create a multi-level brand matrix of independent brand+CP brand. (1) Self-owned brand system: ① Yifidan: Promoting brand and product echelon, pioneering activities continue to strengthen luxury positioning. The global overall growth rate was about 100%. GMV broke 1 billion yuan for the first time in 23 years, and FeiGa counted Douyin channel's sales volume of 380 million + in 23 years, an increase of 80% + year over year; 24Q1 is expected to continue to increase, with the Douyin channel increasing by more than 50% year on year, mainly due to the scarcity of high-end positioning + increased penetration rate among luxury people; the 24M3 sunscreen product is expected to continue to increase revenue. ② Imperial Clay Shop: Fully upgraded and refreshed in '23, revenue has declined. The plan is to upgrade the brand in May '24, which is expected to bring about an inflection point in growth. ③ Other brands: Dashuidi, VAA, etc. continue to strengthen brand mentality, and all have achieved rapid growth. PA has basically solved supply chain problems, and 24Q1 sees the overall trend improving. (2) Agency brand system: A “1+5+n” agency pattern has been formed. Johnson & Johnson's internal adjustments in '23 led to a decline in revenue in the Johnson & Johnson sector. It is expected that there will be further cooperation in the future, and the share of Johnson & Johnson's agency business will decrease.
Multi-channel efforts are being made, and digital operations continue to empower brands. (1) Sales model: In '23, the company's revenue from self-operation, distribution, consignment sales and other channels accounted for 70.05% /yoy+3.67pct, 20.58% /yoy+1.73pct, 6.19% /yoy-2.29pct, 3.18% /yoy-3.10pct, with revenue of +0.40%, +3.89%, -30.53%, and -51.89%, respectively. (2) Online channels: The company mainly focuses on online channels, with online revenue of 4,080 million/yoy -4.40%, accounting for 90.79% /yoy+0.42pct; third-party platforms accounted for 82.63% of revenue, revenue of 37.13 billion/yoy -5.12%, own platform revenue accounted for 8.16%, revenue of 367 million/yoy +3.56%; in '23, 31.06% of revenue, 1,396 million/yoy +3.56% of Douyin revenue. Revenue of 1,134 million/yoy +60.56%.
Investment advice: Own brand: EDB is growing well, and luxury attributes continue to increase the penetration rate of luxury people; the refurbishment and upgrading of Imperial Clay has not met expectations, and Big Water has maintained growth resilience. Agency business: Entering a stable development path, Johnson & Johnson cooperates steadily, and segmented brands are expected to improve their layout. The company's revenue for 2024-2026 is estimated to be 5.122 billion/ 5.889 billion/ 6.655 billion, and net profit to mother of 380 million/469 million/548 million. The corresponding PE is 18.4X/14.9X/12.7X, respectively, maintaining the “increase” rating.
Risk warning: Risk of declining prosperity in the cosmetics industry; competition in the cosmetics industry increasing risk; risk of strategy advancement falling short of expectations; new product promotion falling short of expectations.