FY2022 Review Summary: Strategic Transformation and Live-Stream E-commerce
Core Content
This document provides a detailed analysis of the financial performance and strategic transformation of the company during FY2022, highlighting the progress and future potential of its live-stream e-commerce business. It outlines the investment thesis, financial forecasts, and key risks associated with the company's stock, while also offering insights into its market position and financial health.
Main Points and Key Information
Financial Performance (FY2022A)
- Revenue: RMB 600.53 million, a -57.67% YoY decline.
- Net Income: RMB -533.95 million, a significant improvement compared to the RMB -1,658 million net loss in FY2021.
- EPS: RMB -0.53, indicating a loss per share in FY2022A.
- P/E: Not available for FY2022A, but expected to be 57.57x, 37.03x, and 28.62x for FY2023E, FY2024E, and FY2025E respectively.
Strategic Transformation
- The company has shifted its focus from traditional education services to live-stream e-commerce, which is now a new growth driver.
- The education business is beginning to stabilize, with a 6% YoY decline in university education revenue and a 22% YoY decline in institutional education revenue, both less severe than in FY2021.
- The number of paying students in the university education segment has stabilized, attributed to product optimization and adjustments in overseas test preparation marketing strategies.
Live-Stream E-commerce Business
- Revenue: RMB 24.6 million in FY2022, with a GMV of RMB 2 billion in the last three months of FY2022.
- User Engagement: The company has nearly 25 million followers, with strong purchase, repurchase, and return rates.
- Dongfang Zhenxuan App: Expected to help the company accumulate private traffic and meet the needs of users with strong shopping intent.
- Profitability: The live-stream e-commerce business has achieved a gross profit of RMB 9.3 million in FY2022 and started to generate profit and positive cash flow from June 2023.
- Profit Margin: The profit margin is much higher than traditional live-stream marketing and MCN companies, mainly due to:
- Revenue Side: Income from product commissions and proprietary sales, with high commission rates.
- Cost Side: Content marketing reduces traffic costs, and brand marketing reduces anchor commission costs.
- Self-operated Products: The self-operated product sales are becoming a major profit driver, with the company expecting a steady-state revenue share of around 50% from self-operated products.
Account Matrix and Brand Value
- The "Beautiful Life" account has started 12-hour daily live-streaming, and its GMV increased by 116% from 8/1 to 8/28 compared to the previous period.
- The account matrix is taking shape, with increased anchor team size, better matching of anchors to product categories, and enhanced supply chain capabilities.
- The company is expected to expand into more categories such as maternity and children, sports, and cultural tourism, thereby fully leveraging its brand value.
Earnings Forecast and Investment Rating
- EPS Forecast: Adjusted to RMB 0.56 and RMB 0.86 for FY2023E and FY2024E respectively, up from RMB 0.54 and RMB 0.85.
- EPS for FY2025E: Estimated at RMB 1.12.
- P/E Ratio: Expected to be 57.57x, 37.03x, and 28.62x for FY2023E, FY2024E, and FY2025E.
- Investment Rating: "Buy" (Maintain), as the company is expected to benefit from strategic transformation and growing live-stream e-commerce business.
Key Risks
- Fierce Competition: The live-stream e-commerce market is highly competitive.
- Anchor Loss Risk: There is a risk of losing key influencers.
- Consumption Trends: Lower-than-expected consumer spending could impact growth.
- Policy Risks: Regulatory changes may affect the business environment.
Financial Forecast Tables
Revenue Forecast
| Year |
Revenue (RMB mn) |
| FY2022A |
600.53 |
| FY2023E |
2,552.43 |
| FY2024E |
3,617.40 |
| FY2025E |
4,963.40 |
Net Income Forecast
| Year |
Net Income (RMB mn) |
| FY2022A |
-533.95 |
| FY2023E |
556.41 |
| FY2024E |
865.21 |
| FY2025E |
1,118.89 |
EPS Forecast
| Year |
EPS (RMB) |
| FY2022A |
-0.53 |
| FY2023E |
0.56 |
| FY2024E |
0.86 |
| FY2025E |
1.12 |
P/E Forecast
| Year |
P/E (X) |
| FY2023E |
57.57 |
| FY2024E |
37.03 |
| FY2025E |
28.62 |
Financial Ratios
| Ratio |
FY2022A |
FY2023E |
FY2024E |
FY2025E |
| ROIC (%) |
-23.95 |
19.80 |
19.61 |
20.70 |
| ROE (%) |
-32.54 |
13.98 |
17.86 |
18.76 |
| Gross Margin (%) |
65.08 |
45.09 |
44.03 |
40.91 |
| Net Margin (%) |
-88.91 |
21.80 |
23.92 |
22.54 |
| P/B (X) |
19.52 |
8.05 |
6.61 |
5.37 |
| EV/EBITDA (X) |
- |
45.53 |
27.75 |
20.45 |
Market Data
| Metric |
Value (HKD) |
| Closing Price |
35.10 |
| 52-Week Range |
2.84/37.60 |
| P/B (X) |
18.80 |
| Market Cap (HKD mn) |
35,247 |
Balance Sheet Highlights
| Item |
FY2022A (RMB mn) |
FY2023E (RMB mn) |
FY2024E (RMB mn) |
FY2025E (RMB mn) |
| Total Assets |
2,059 |
5,661 |
5,903 |
7,112 |
| Cash |
547 |
1,454 |
2,133 |
3,256 |
| Shareholders' Equity |
1,641 |
3,980 |
4,846 |
5,964 |
| Total Liabilities |
418 |
1,681 |
1,058 |
1,148 |
Cash Flow Highlights
| Item |
FY2022A (RMB mn) |
FY2023E (RMB mn) |
FY2024E (RMB mn) |
FY2025E (RMB mn) |
| Net Cash Flow |
-972 |
906 |
680 |
1,123 |
Analyst Information
Conclusion
The company is undergoing a strategic transformation that is starting to yield results. While the education business has seen a decline in revenue, it is stabilizing, and the live-stream e-commerce business is showing strong growth and profitability. The "Beautiful Life" account is a key part of the account matrix, and the launch of Dongfang Zhenxuan app is expected to enhance private traffic accumulation and expand the user base. The investment rating is "Buy", with positive EPS forecasts and declining P/E ratios indicating improving fundamentals. However, the company faces challenges such as intense competition, potential loss of anchors, lower-than-expected consumer spending, and regulatory risks.
