20231026-招银国际-上海家化-600315.SH-3Q_rev_np_-11_40__a_significant_miss_5页_1mb

Company Performance Summary

Shanghai Jahwa (600315 CH) reported a poorer-than-expected 3Q 2023 financial performance, with revenue down 11% YoY to RMB 15 billion and net profit falling 40% to RMB 931 million. The decline was attributed to persistent inflation constraining overseas business, while domestic growth slowed without strong base effects. Skincare and HPC segments suffered significant drops, down 85% and 183% respectively due to weak demand, although gross profit margin improved slightly to 57.7% thanks to input cost savings.

Analyst Insights

Most analysts expect a continued downward trend, downgrading earnings for 2023 based on the 3Q results. In the conference call, the company announced a restructuring to merge beauty units, aiming to enhance online presence and streamline operations amid increased marketing investments. However, Double 11 pre-sales show soft momentum, with only mild performance for Jahwa's brands compared to competitors like Proya.

Valuation and Outlook

Jahwa was downgraded in valuation, with the target price reduced from RMB 309 to RMB 214, reflecting lower growth expectations. An Earnings Revision showed net profit outlook cut, impacting key financial metrics like P/E ratio, which stands lower than average since 2019. Key numbers include domestic/overseas sales decreasing 36%/93% YoY, and online sales growth capped at 7% for the quarter. Analysts reiterate a HOLD recommendation due to near-term challenges and failed attempts to reverse the declining trend.