20221103-招银国际-贝泰妮-300957.SZ-A_soft_3Q_prompted_for_an_earnings_cut_4页_887kb

Botanee Biotech (300957 CH) Summary

Core Content

Botanee Biotech, a Chinese consumer goods company, reported its third-quarter (3Q) results, which showed net profit in line with both consensus and estimates. However, revenue was slightly below expectations, with a 10% to 5% decline. The company attributed this to several factors, including the forward shift of consumption during the 618 shopping festival, a traditionally slow season, and the impact of city lockdowns on offline operations and expansion.

Excluding non-core items, recurring net profits grew by 20% YoY to RMB96mn, aligning with a 21% top-line growth. The company's flagship brand, Winona, performed well, with a strong presence in KOL live streaming, featuring 8-9 SKUs. Additionally, Botanee launched its new brand, Winona Baby, and promoted two hero products through live-streaming channels, indicating a strategy to expand its market reach and product offerings.

Earnings and Forecast Adjustments

As a result of the 3Q performance, the company's revenue and net profit forecasts for 2022 and 2023 were revised downward. The revenue forecast was cut by 10.2% and 13.9% for 2022 and 2023 respectively, leading to a 5.4% and 10.7% reduction in net profits. Despite these adjustments, the gross margin and EBITDA margin remained largely unchanged. The company's 4Q22E revenue and net profit are expected to grow by 33% and 30% respectively, indicating a recovery in the fourth quarter.

Valuation and Target Price

The new target price (TP) for Botanee Biotech is RMB229.0, based on a 2.0x PEG valuation model due to the company's fast-growth outlook and short listing history. This TP implies a 63.0x end-23E P/E ratio. The previous TP was RMB251, and the current price is RMB159.0, which is 44.0% below the new TP.

Key Financial Highlights

• Revenue Growth: FY20A to FY24E revenue is projected to grow from RMB2,636mn to RMB9,282mn, with a YoY growth rate decreasing from 35.6% to 28.8%.
• Net Profit: Net profit is expected to increase from RMB544mn in FY20A to RMB1,869mn in FY24E, with a YoY growth rate of 21.2%.
• Gross Margin: The gross margin was 76.5% in 3Q, up 0.2pp YoY, driven by strong performance in skincare SKUs.
• Operating Expenses: Operating expenses increased, which slightly reduced the gross margin by 1pp to 13.7%.
• Earnings Summary: EBITDA margin was 24.7%, and net margin was 21.6% in 3Q.
• Balance Sheet: The company's total net assets are expected to grow from RMB1,202mn in FY20A to RMB8,155mn in FY24E, with a consistent net cash position.
• Key Ratios: ROE is projected to be 23.0%, with a consistent trend of improvement. The current ratio is 0.5, and the net receivable days are 21, indicating strong liquidity and efficient working capital management.

Share Performance and Market Data

• Market Cap: RMB67,543mn
• 3-Month Trading Volume (RMB mn): 311.3
• 52-Week High/Low (RMB): 249.9 / 140.8
• Total Issued Shares (mn): 424

Analyst Ratings and Recommendations

• Analyst Recommendation: BUY (Maintain)
• Target Price (RMB): 229.0
• Current Price (RMB): 159.0
• Potential Return: Over 15% over the next 12 months

Shareholding Structure

• KM Nuona Tech: 46.1%
• TJ Hongshan Juye: 18.8%
• Kunming Zhenli: 8.8%

Key Ratios Summary

Earnings Revision Table

Key Takeaways

• 3Q results were in line with expectations, despite lower revenue.
• Strong performance in skincare SKUs contributed to higher gross margin.
• The company is actively promoting new brands and products through live-streaming.
• Earnings forecasts were revised downward for 2022 and 2023, but 4Q is expected to show growth.
• The valuation model suggests a 63.0x P/E ratio, reflecting the company's growth potential.
• The company maintains a BUY rating, with a target price of RMB229.0, indicating a potential return of over 15% over the next 12 months.