20220822-招银国际-上海家化-600315.SH-2Q_miss__but_the_worst_is_likely_behind_us_5页_1mb

Jahwa (600315 CH) Summary

Core Content

Jahwa, a Chinese cosmetics company, reported a disappointing 2Q performance due to the impact of Shanghai's lockdown and its internal channel restructuring. The results were worse than expected, with both revenue and net loss falling below estimates. The primary reasons for the decline were a $38%$ drop in skincare sales and a $13%$ decline in HPC (household and personal care) sales. Despite these challenges, the company managed to uphold its gross margin through disciplined price promotions and stringent cost controls.

Main Points

• 2Q Performance:

  • Revenue declined by 23.8% YoY to RMB1.6bn.
  • Net loss of RMB41.7mn, compared to a net profit of RMB117mn in 1H21.
  • GPM dropped to 56.3%, -7.5pp YoY.

• 1H22 Performance:

  • Revenue: RMB3.7bn, -11.8% YoY.
  • Net income: RMB158mn, -39.6% YoY.
  • GPM: 59.9%, -1.4pp YoY.

• 2022E Forecast Adjustments:

  • Revenue and net profit estimates were cut by 7.1% and 20.5%, respectively.
  • Revised target price is RMB39.2, down 15.2% from the previous RMB46.2.
  • Assumes Jahwa will meet the B Target of its revised 2020 ESOP plan.

• 2H22 Outlook:

  • Skincare segment is expected to recover, leading to improved GPM YoY.
  • Sales are projected to resume positive growth in 3Q.
  • Focus on four brands: Dr Yu and Herborist for skincare, Liushen for HPC, and Giving for baby and mom care.

• Product Launches:

  • New skincare product lines launched in 2022E, including New Taichi, Whitening, Extra Control Concentrate, and Dual Dendrobium Reviving & Moisturizing.
  • Plans for new product launches in 2H22 to boost performance across different segments.

Key Financial Data

Key Ratios

Key Segments

• Skincare:

  • Most affected by lockdowns, down 34.8% YoY in 1H22.
  • Launch of new product lines in 2022E, targeting higher-end consumers.
  • Herborist and Dr Yu are core brands, with continued growth in 2H22.

• HPC:

  • Liushen maintained positive growth of 1.3% YoY in 1H22.
  • Strong performance in toilet water category, with 23% YoY growth in total online GMV and 56% YoY growth in Tmall flagship store sales during 6.18.
  • Shower gel is becoming a key growth driver for Liushen.

• Baby and Mom Care:

  • Giving, the main brand, was down ~30% in 1H22.
  • Focus on expanding in the segment, targeting 0-1 aged kids and enhancing brand image.
  • Plans to launch new products in 2H22.

• Hero Products:

  • Dr Yu's Macromolecular Platinum Shield Sunscreen ranked N.1 on Tmall.
  • Herborist's New Taichi series became a major contributor to growth.
  • Repurchase rates for Herborist and Dr Yu improved in 2022E.

Financial Summary Highlights

• Net Profit: RMB574mn for FY22E, down 20.5% from previous estimates.
• EPS: RMB0.85 for FY22E, down 20.5% from previous estimates.
• Gross Margin: 58.4% for FY22E, down 0.7pp from previous estimates.
• Operating Margin: 7.1% for FY22E, up 0.2pp from previous estimates.
• Net Debt to Equity: Maintained as net throughout the forecast period.

Share Performance

• 1-month: -5.3%
• 3-months: +3.7%
• 6-months: -17.2%

Analyst Rating

• CMBIGM Rating: BUY (maintain)
• Target Price: RMB39.2 (down 15.2% from previous RMB46.2)
• Potential Return: +18.3% over next 12 months

Shareholding Structure

• Shanghai Jiahua (Group) Co.: 50.8%
• Shanghai Jiushi Group Co.: 3.9%
• Shanghai Chongyang: 2.8%
• Strategic Investment Co.: Not specified

Disclaimer

• The report contains forward-looking statements and is based on publicly available information.
• CMBIGM does not provide individually tailored investment advice.
• Investors are advised to consult with a professional financial advisor for their own investment decisions.
• The report is for the use of intended recipients only and may not be reproduced or distributed without prior written consent.

Analyst Certification

• The analyst certifies that all views reflect personal opinions.
• No compensation was directly or indirectly related to the report's content.
• Analyst and associates did not trade in the stock covered in the report within 30 days prior to its issue.

CMBIGM Ratings

• BUY: Stock with potential return of over 15% over next 12 months.
• HOLD: Stock with potential return of +15% to -10% over next 12 months.
• SELL: Stock with potential loss of over 10% over next 12 months.
• NOT RATED: Stock is not rated by CMBIGM.
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark over next 12 months.
• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark over next 12 months.
• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark over next 12 months.