Incident: The company announced on May 14 that Chairman Pan has resigned as CEO and general manager. The new CEO Lin Xiaohai has served as CEO of Gaoxin Retail, Vice President of Alibaba, General Manager of Retail Connect Division, and President of P&G Greater China Marketing.
President Pan took office in May 2020. L'Oréal's background+improved profit margins+cosmetics beta, and the stock price doubled over the next year. The new chairman has a rich history and can further empower Jiahua's marketing side and online and offline channels. It remains to be seen whether he will bring substantial changes to Jiahua, but we believe that there are positive changes in the current position that deserve attention.
The organizational structure of Jiahua has been adjusted since 23Q3, with unified management and brand first: the company made organizational structure adjustments in Q3 last year, shifting from a functional to a division structure. The main purpose is to simplify the communication process within the organization, speed up response to the market, and establish a horse racing mechanism. The efficiency has been optimized to a certain extent, which is also reflected in the Q1 report.
E-commerce data in the beauty and skincare sector has begun to improve, and the offline inventory burden has gradually eased: Baicaoji has been improving e-commerce since last year, and the online growth rate is quite impressive. In 24Q1, traditional e-commerce channels represented by Tmall increased by about 49% year-on-year, and department store inventory has been digested from 1 billion to more than 300 million at present.
The income volume of Baicaoji and Yuzawa is not expected to have much room to decline, and there is potential for growth with minor improvements.
In 22/23, the company's net profit withheld fell 20%/fell 42%. This year, the company's revenue from brands such as Yuzawa, Meijiajing, and Shuangmei all increased in Q1. Net profit after deducting non-return to mother increased by 29%, and profit margins improved markedly.
Profit forecast and investment advice: We expect the positive increase in net profit this year. 24Q1 deducts 290 million yuan of non-net profit, which is the best Q1 performance in history. The company's net profit for 24-26 is estimated to be 6.2, 7.3, and 82 billion yuan, respectively. The current market value of 13.6 billion yuan corresponds to 22 times this year's valuation. We maintain the view that the company has a reasonable value of 25.44 yuan/share, corresponding to 28 times PE in 24, maintaining a “buy” rating.
Risk warning: The decline in optional consumption sentiment has led to a decline in industry growth; industry competition has intensified; new product expansion falls short of expectations.