1Q21 performance is lower than we expected.
The company announced 1Q21 results: revenue of 810 million yuan, an increase of 21% over the same period last year; net profit of 134 million yuan, an increase of 4.3% over the same period last year; and non-return net profit of 128 million yuan, an increase of 24% over the same period last year. The performance was lower than expected due to a slowdown in revenue growth from our main business.
The company's main business income was 153 million yuan, an increase of 0.6% over the same period last year, of which the revenue from brand licensing and integrated services business totaled 137 million yuan, up 0.15% from the same period last year, and the net profit from its parent was 105 million yuan, up 5.4% from the same period last year. 1Q21 omni-channel GMV91 billion yuan, an increase of 59% compared with the same period last year, of which the GMV of Ali, JD.com, pinduoduo and VIPSHOP channels was 46,000,000 yuan respectively, an increase of 29%, 59%, 206% and 67% respectively over the same period last year. We estimate that the monetization rate of 1Q21 is about 1.51%, which is 0.9 ppt lower than the same period last year, which we think is mainly related to the decrease in the proportion of revenue from Ali channels.
The time interconnection income was 660 million yuan, up 27% from the same period last year, and the net profit from home was 29.1 million yuan, up 0.35% from the same period last year.
The decline in gross profit margin and the sharp increase in effective tax rates affect the net profit margin. The gross profit margin decreased from 4.5ppt to 23.3% compared with the same period last year, which is expected to be related to the increase in the proportion of revenue from the time-connected business with low gross profit margin; the total rate of sales and management expenses decreased by 0.3 ppt compared with the same period last year; as the company strengthened the collection of accounts receivable, the credit impairment loss changed from 25.84 million yuan to 2.67 million yuan in 1Q20, increasing profits. However, investment income and non-operating income (mainly government subsidies) decreased year-on-year, as well as a sharp increase in effective tax rates had a negative impact on net profit, and the overall net interest rate fell 2.6ppt to 16.5% year-on-year.
Factoring loans and time-linked prepaid recharge fees resulted in an increase in accounts receivable and prepayments compared with the beginning of the year. The accounts receivable of 1Q21 as of 1.27 billion yuan, up 12% from the beginning of the year, was mainly due to new loans for factoring; the prepayment was 350 million yuan, an increase of 41% over the beginning of the year, mainly due to the increase in media recharge paid in advance by time interconnection; and the account payable was 63.42 million yuan, a decrease of 58% compared with the beginning of the year, due to the credit payment of media by time interconnection. The net operating cash flow of 1Q21 was 280 million yuan, which was better than that of 1Q20.
Development trend
In 2021, the company plans to further enrich the brand and category matrix, optimize supply chain services, expand live e-commerce channels, and further increase information and digital investment.
Profit forecast and valuation
Maintain the EPS forecast of 0.60 yuan and 0.69 yuan in 2021 and 2022. The current share price corresponds to 14 times 2021e/22e 's price-to-earnings ratio of 12 times earnings. Maintain a neutral rating and target price of 10.14 yuan, corresponding to 17 times 2021 price-to-earnings ratio, 22% upside compared to the current stock price.
Risk
The operation of e-commerce platform and changes in traffic rules, the growth of a single channel is not as expected, and the expansion of new categories is not as expected.