20220826-招银国际-珀莱雅-603605.SH-2Q_in_line_with_full_year_guidance_maintained_3页_792kb

Proya Cosmetics (603605 CH) Company Update Summary

Core Content

Proya Cosmetics (603605 CH) has released its 2Q financial results, which align with its full-year guidance. The company is part of the China Consumer Staples – Household and Personal Care sector, and CMB International Global Markets has maintained a BUY rating with a target price of RMB184.

Key Financial Highlights

• 2Q Revenue: RMB 1.37bn (+35.5% YoY), slightly lower than the previous quarter's growth of 38.5%.
• 2Q Net Profit: RMB 139mn (+19.2% YoY).
• Gross Margin: Expanded to 68.6% (up 5.5pp YoY and 1.0pp QoQ), driven by a continuous increase in Average Selling Price (ASP) to RMB 261 in 1H22.
• Net Margin: Declined to 10.1% in 2Q (from 12.6% in 1Q), primarily due to RMB 70mn in expenses related to the recall and return of sunscreen serum in May.
• Expected Normalization: Net margins are expected to return to ~12% starting from 3Q.

Full-Year Guidance

Management has maintained its full-year revenue and net profit growth guidance of 25% for 2022E. This implies that offline sales growth will remain negative throughout 2H22, given the 30-40% expected online sales growth.

New ESOP Plan

A new Employee Stock Ownership Plan (ESOP) was initiated in July 2022, with vesting conditions set at no less than 25% / 23% / 22% revenue/net profit growth YoY for 2022-24E. Management remains confident in meeting these targets.

Product Strategy Success

• Hero Product Strategy: Now represents 35% of total revenue (up from 20% in 2021), contributing to improved repeat purchase rates and ASP.
• Brand Performance:
  • Timage revenue doubled to RMB 230mn.
  • Hapsode has already turned profitable.
  • High-end hair care brand Off and Relax achieved breakeven.

Financial Projections (FY20A–FY24E)

Key Ratios

Sales and Profit Breakdown

• Skincare and Cleanser: Dominates revenue, accounting for 84.2% in FY22E.
• Makeup: Grew to 15.1% of total revenue in FY22E.
• EBIT and EBITDA: Projected to increase steadily, reaching RMB 1,517mn and RMB 1,637mn in FY24E.

Cash Flow and Balance Sheet

• Net Cash from Operating Activities: RMB 690mn in FY22E, with a slight decline in subsequent years.
• Net Cash from Investing Activities: RMB 15mn in FY22E, showing a negative trend in later years.
• Net Cash from Financing Activities: RMB -255mn in FY22E, indicating potential debt reduction.
• Cash at End of Year: RMB 2,457mn in FY22E, with a slight increase to RMB 2,689mn by FY24E.
• Current Ratio: Dropped to 0.6 in FY22E, suggesting potential liquidity concerns.
• Inventory Turnover Days: Declined from 125 in FY20A to 100 in FY24E, indicating improved inventory management.

Shareholding Structure

Stock Performance

Analyst Certification

• The analyst certifies that the views expressed in the report accurately reflect personal opinions.
• No compensation is directly or indirectly related to the report's specific views.

Risk and Disclaimer

• The report is not an offer to buy or sell any security.
• CMBIGM does not provide individually tailored investment advice.
• Past performance does not guarantee future results.
• The report is for the use of intended recipients only and cannot be reproduced or distributed without prior written consent.

Ratings

• BUY: Stock with potential return of over 15% over next 12 months.
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.

Contact Information

• CMB International Global Markets Limited
  Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong
  Tel: (852) 3900 0888
  Fax: (852) 3900 0800