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Shanghai Jahwa (600315) Third Quarterly Report Review: Slightly Twisted Revenue in the Adjustment Phase

Shanghai Jahwa (600315) Third Quarterly Report Review: Slightly Twisted Revenue in the Adjustment Phase

Brief description of results: Q1 to Q3 2019, Shanghai Jahwa achieved revenue 57.

3.5 billion / + 5.

81%; operating profit reached 6.

5.9 billion, net profit attributable to mother 5.

4 ‰ / + 19.

09%, deducted non-net profit attributable to mother 3.

800 million yuan / + 2%.

Single-quarter revenue in Q3 2019 is 18.

1.3 billion / + 3.

28%, net profit attributable to mother is 96.49 million yuan / -29.

55%, attributable to the mother deducted non-net profit1.

19 ppm / -11.

3%.

In the third quarter of 2019, there was a slight gain in the growth rate of single-quarter revenue. Due to the use of new financial instruments, changes in operating fair value caused gains and losses, asset impairment losses, credit impairment losses and increased revenue, which led to improved single-quarter results.After excluding the impact of changes in accounting standards, the company’s profitability remained stable.

Revenue growth increased slightly, and profitability remained stable.

① 2019Q1-Q3 Shanghai Jahwa achieved revenue 57.

3.5 billion / + 5.

81%, Q3 quarter growth rate of 3.

3%, the growth rate has increased.

Net profit attributable to mother 5.

4 ‰ / + 19.

09%, deducted non-net profit attributable to mother 3.

8 ppm / + 2%, earnings growth has improved due to revenue growth.

② The gross profit margin for Q1 to Q3 2019 is 61.

63 %%, a decrease of 1 per year.

16pct, Q3 single quarter increased by nearly 1.

94pct is basically a change in sales structure. The proportion of high gross profit products in Q3 has increased. Specifically, for each SKU, the company’s gross profit margin has remained stable.

③ 2019Q1-Q3 sales expense ratio increased by 0.

27pct to 42.

13%, the management expense rate is the same as zero.

42pct to 11.

40%.

The sales expense rate for the single quarter of 2019 increased by 1.

49 points to 39.

15%, the management expense ratio rose by 0.

63pct to 12.

72%.

④ The growth rate of single-quarter revenue in the third quarter of 2019 decreased slightly. As a result of the use of new financial instruments, changes in operating fair value resulted in gains and losses, asset impairment losses, credit impairment losses, and increased earnings, resulting in improvements in single-quarter results.Despite the impact of changes in accounting standards, the company’s profitability remained stable. Channels: Online channels have grown rapidly, and offline channels have expanded steadily.

Online channels: In the first three quarters of e-commerce, GMV achieved a growth rate of 27%, e-commerce channel revenue increased by 19%, and community channel growth achieved a growth rate of more than 60%. The overall online business accounted for approximately 22.

5%.

Offline channels: Supermarkets, mother-to-child, and CS channels maintained small-digit growth in the first three quarters. Department store channels suffered double-digit declines due to competition from international brands. Q3 encountered the launch of Herborist’s new Tai Chi Sun and Moon Essence in the single quarter. Department storesThe decline in the channel has increased.

Brands: Mature brands maintain their superiority and grow rapidly during the cultivation period.

Herborist: In the first half of the year, we mainly promoted the freeze-dried mask series. As the drainage explosion, the upgraded Taiping Sun and Moon Essence was mainly promoted in the second half of the year. The sales growth rates from January to September basically overlapped.

Liushen: The growth rate has improved, and sales revenue increased slightly from January to September.

Gao Fu: There has been improvement and decline. The main brand has switched from moisturizing to oil control. The overall conversion will take time, and further product upgrades will be carried out next year.

US-Canada: The number dropped from January to September, and it has stopped falling in Q3. Sales of 杭州桑拿 America-Canada have overlapped, which mainly occurred in the second half of the year. The fragrance high-end hand cream was launched in the second half of the year to adapt to the trend of consumption upgrade.

Qichu, Jia’an, Yuze, and Pianzai: They have achieved growth rates ranging from 30-50%.

Tang Meixing: In the first three quarters, the revenue growth rate was less than 5%, mainly due to overseas North America, the United Kingdom and other regions. The promotion of competitive products was heavily discounted and the competition was fierce, which affected the growth of Tang Meixing’s global business.

Cash flow is good and operating capacity remains stable.

2019Q1-Q3, operating cash flow7.

25 trillion US dollars, an annual increase of 1%, and inventory declines by 8 per year.

3%, 11 quarters in the past three years, and the 10th and 11th quarters have witnessed an overall decline in inventory for two consecutive quarters. This is a benign situation that has appeared for the first time in nearly 11 quarters.And the stability of the inventory management business.

Accounts receivable grows by 8 per year.

6%, which is normal.

Tai Chi Essence launched intensive social marketing and looks forward to bringing an inflection point to the development of Herborist.

The Tai Chi Essence offline counter will be listed at the end of September.

It is expected that single product sales (invoicing revenue) will account for 15% of Herborist’s omni-channel sales in September, October, and December.

At present, according to consumption indicators, in terms of WeChat, Taiji Mayi’s circle of friends has an ad click rate of more than 4%, the actual exposure is nearly 40 million, Taiji hip-hop circle of friends, the purchase conversion rate has finally reached 33%, and it is strong in recruiting new customers.

In Weibo, the number of Tai Chi hip-hop super-talkers was close to 40 million, setting a new record for the brand, with over 82 million exposures and over 3.7 million interactions.

In terms of vibrato, Mayi TVC’s vibrato launched CTR10.

18%, Tai Chi Street Dance Vibrato Challenge, exposure 8 from September 22 to October 9.

7 billion times, diversion to the purchase interface of independent visitors 188, in terms of Little Red Book, # 双 瓶 双 效 青年 闪闪 # Topic 41.

30,000 views.

Under the exposure of high-density social marketing, Tai Chi essence products are expected to erupt, and Herborist is expected to usher in a turning point in growth.

Investment suggestions: Three-dimensional brand layout is completed, multi-dimensional channels are adjusted smoothly, management efficiency is continuously optimized, and incumbent freshmen are progressing.

The company’s main brand market share is steadily at the forefront and continues to increase, and the brand has grown rapidly during the cultivation period; online channels have been effective and significant, and offline channels have expanded steadily; operating management efficiency has been continuously optimized, and profitability has steadily improved.

The company’s three-dimensional brand layout is completed, multi-dimensional channels are adjusted smoothly, management efficiency is continuously optimized, and it is expected to rely on the scale advantage of the leader to achieve sustained and stable growth.

We expect the company’s net profit for 2019-2021 to be 6, respectively.

37/6.

56/7.

26 ppm; Maintain Buy-A investment rating with 6-month target price of 39.

07 yuan, corresponding to 40xPE in 2020.

Risk reminders: Macroeconomic growth is declining, channels are accelerating change, Herborist brand sales continue, new brand cultivation is less than expected, etc.