Introduction to this report:
The company's Douyin platform has stable advantages, and the results of building brand reputation are gradually showing, and spillover to many platforms are growing at an impressive rate. We believe that the company's fundamentals are strong and stable, and the growth in performance is expected to gradually confirm.
Key points of investment:
Conclusion: The company's 618 e-commerce platforms are growing strongly, Douyin's brand image has been successfully shaped, and the spillover results are obvious. We expect the company's revenue side to maintain steady growth in the second quarter, and the decline in raw material prices and product structure improvements are expected to boost profits. Maintain the 2024-2026 EPS forecast of 0.70/0.81/0.99 yuan, maintain the target price of 27.54 yuan, and maintain the “gain” rating.
Probiotic products are popular, and brand influence continues to increase. During the 618 period (May 20 to June 20, 2024), Liberty Point sold more than 1.4 million sets of probiotic pads. The company's 5A audience exceeded 210 million, the A3 crowd exceeded 71 million, brand searches increased 330% year-on-year, and global exposure reached more than 1.5 billion. Recently, the company launched the Probiotic 2.0 series. The unit price of tablets increased by about 20%. The promotion of large single products is expected to lead to an improvement in the product structure. The increase in the proportion of high-end 2024Q1 products will drive a gross margin of +7.50pct/month-on-month +1.16pct. It is expected that the promotion of new probiotic PRO+ products will further drive profitability improvement.
Douyin brand building has had spillover results, and the multi-platform strategy is targeted. The company positions Douyin as a new platform, focusing on strengthening brand reputation, while Tmall, JD, Pinduoduo, etc. focus on balancing revenue growth and profit. Currently, Douyin brand reputation has fed back to the rest of the platforms. Looking at it by platform: 1) Douyin: Maintaining strength. As a driving channel to shape brand reputation, 618 promoted a stable position in TOP1, with a year-on-year increase of more than 290%. 2) Tmall: Strong growth. The company actively collaborated with experts such as Li Jiaqi and Honeybee Surprise Club to win the top 2 in the Tmall Personal Care Sales List, an increase of more than 120% over the previous year. At present, the repurchase rate is close to the level of leading international brands. It is expected that Tmall will contribute a better profit margin, and the increase in ranking and share is expected to unleash profits. 3) Cat Super: Gaining momentum and won the top 1 in the list of emerging brands, with a year-on-year increase of more than 270%. 4) Pinduoduo: Top 8 in the personal care brand sales list and top 2 in the sanitary napkin brand sales list, with a year-on-year increase of more than 380%. The company has a shorter decision-making chain and can adapt more quickly to market needs. Currently, it has independent team support, and it is worth looking forward to rapid growth in the future. 5) JD: Twice at the top of the JD personal care competition, with a year-on-year increase of more than 230%. It is expected to develop as a key channel in the future.
Offline sales are being actively promoted, and outlying provinces continue to grow at a high rate. The shopping guide management team of the company's operation center joined hands with provincial and regional shopping guide management to officially release offline Douyin 2.0, bringing iterations of excellent market cases, actively promoting “Q2 > Q1”, and steady expansion in peripheral provinces. The company has strong rapid iteration ability and market responsiveness, and can quickly adapt to market changes and continue to promote brand upgrading and innovation. Among the peripheral provinces, potential provinces such as Guangdong and Jiangsu performed excellently. Hunan is expected to cross the break-even point, and profits will grow nonlinearly after the scale effect is released.
Risk warning: industry competition squeezes profits; product innovation is imitated by peers.