20230331-招银国际-贝泰妮-300957.SZ-ESOP_targets_stabilize_earnings_expectation_but_sentiment_overhang_remains_4页_890kb

Botanee Biotech (300957 CH) Summary

Core Content Overview

Botanee Biotech, a Chinese consumer goods company, has been the subject of a detailed equity research update from CMB International Global Markets. The report outlines the company's performance, future expectations, and valuation adjustments, while also addressing ongoing challenges and positive developments.

Main Business Performance

• Revenue Growth: The company has shown consistent revenue growth over the past few years, with notable increases in FY20A to FY23E. FY23E revenue is expected to be RMB6,547 million, representing a 30.6% YoY increase.
• Net Profit: Net profit for FY23E is projected to be RMB1,374 million, up by 28.3% YoY.
• Earnings Per Share (EPS): EPS is expected to reach RMB3.2 in FY23E, up by 28.3% from the previous year.
• 4Q Miss: Despite a 4Q revenue miss, the company is expected to recover in 2023 due to the reopening of China and its strong OMO (online and offline) distribution network.

Key Drivers of Recovery

• OMO Distribution Network: The company's OMO model is expected to support recovery as China's economy reopens.
• R&D Franchise: Botanee's unchallenged R&D capabilities differentiate it from peers.
• Online Sales Growth: Winona 2M23 sales saw growth of over 20% on Tmall/Taobao and over 300% on TikTok.
• Offline Expansion Potential: Offline business is expected to grow from 19% to 26% of total revenue by 2024E, with the company currently penetrating less than 5% of national drug stores.

Valuation and Earnings Revision

• Target Price (TP): The new TP is set at RMB157, down from RMB229, reflecting a 9% cut in 2023/24E revenue and net profits.
• P/E Multiple: The TP is based on a 48.5x end-23E P/E, which is -1 standard deviation below its average since IPO.
• Earnings Revisions:
  • Revenue for FY23E is revised down by 9% compared to the previous forecast.
  • Gross profit is revised down by 9.7%.
  • EBITDA is revised down by 17.5%.
  • Net profit is revised down by 10.9%.

Positive Developments

• ESOP Plan: The company announced an ESOP plan for its 298 employees, with targets of 28% revenue growth and 61.3% net profit growth for 2023/24/25E. This is seen as exceeding market expectations and providing clear financial guidance.
• Dividend Yield: The dividend yield is expected to increase from 0.6% in FY22E to 1.0% in FY24E, indicating improved shareholder returns.

Challenges and Sentiment Overhang

• Product Scandal: A product scandal during the Double 11 campaign in 2022 has affected investor sentiment.
• Founder Departure: The departure of a co-founder and sell-off by a pre-IPO investor continue to weigh on the share price.
• Reputation Rebuilding: The company needs to reestablish its track record with the market, especially as the low-hanging fruit of livestreaming distribution is no longer available.

Financial Ratios and Metrics

• Gross Margin: Expected to remain relatively stable at 75.1% for FY23E, with a slight decline to 74.8% in FY24E.
• Net Margin: Declined slightly to 20.4% in FY24E from 21.0% in FY23E.
• ROE: Expected to increase to 22.1% in FY24E, reflecting improved profitability.
• Current Ratio: Improved from 0.4 to 0.5 in FY23E, indicating better liquidity.
• Inventory Turnover Days: Increased slightly to 172 days in FY24E from 171 days in FY23E.

Shareholding and Performance

• Shareholding Structure:
  • KM Nuona Tech holds 46.1%.
  • TJ Hongshan Juye holds 18.8%.
  • Kunming Zhenli holds 8.8%.
• Share Performance:
  • 1-month: -8.0%
  • 3-month: -14.7%
  • 6-month: -26.0%
  • 12-month: -22.2% downside from previous TP.

Analyst Ratings

• CMBIGM Rating: BUY, with a potential return of over 15% over the next 12 months.
• Industry Outlook: OUTPERFORM, indicating the industry is expected to outperform the broad market benchmark.

Disclosures and Legal Information

• Analyst Certification: The analyst certifies that the views expressed reflect personal opinions and are not influenced by compensation or conflicts of interest.
• Important Disclosures:
  • The report is not investment advice and is subject to change.
  • CMBIGM is not liable for any losses arising from reliance on the information.
  • The report is for intended recipients only and may not be reproduced or distributed without consent.
  • Specific distribution rules apply to UK, US, and Singapore recipients.

Conclusion

Botanee Biotech is expected to recover from its 4Q performance as China reopens, supported by its strong OMO distribution network and R&D capabilities. While the company faces ongoing sentiment overhang due to past scandals and founder changes, the ESOP plan and continued growth in key markets provide positive momentum. The revised target price reflects a more conservative valuation approach, considering the current market conditions and sentiment. The company's financial performance and metrics indicate a stable earnings trajectory, with potential for improved shareholder returns and profitability.