1Q in line; 2023 guidance maintained
珀莱雅(603605)
2023 guidance maintained. During the conference call, managementreiterated its 2023 growth outlook to be in line with its ESOP target at 23%YoY, with steadily improving GPM. Of note, the plan was initiated in July lastyear with vesting condition stipulated to be no less than 25%/ 23%/ 22%revenue/ net profit growth YoY for 2022-24E. This year, selling and R&Dexpense could kick-in higher along with intensifying promotional campaignsand new launches, but such is likely to be offset by a stable administrationexpense ratio. Net-net, we expect a small increase in net margins.
Sub-segment growth outlook. By channel, management expects 30%+growth across all brands online, when offline sales likely to remain flattish. Byproduct, management expects growth momentum to extent for both colormake-up and skincare segment. Separately, management has expressed itsconfidence in the 618 sales outlook. However, no tangible target was givenverbally during the call.
Management shares disposal plan. Management mentioned that there willbe upcoming senior management shares disposal from Chairman (Mr Hou)and GM (Mr Fang), each selling no more than 1.5% of Proya’s total shares.Meanwhile, deputy GM (Mr Jin) and deputy board secretary (Ms Wang) planto sell no more than 25% of their own shares.Other key results takeaway
1Q23 largely in line. Revenue kicked-in at RMB1.6bn, up 29.3% YoY, withnet profits standing at RMB 200mn, up 31.3%. On a positive note, GPM camein slightly higher than expected at 70%, thanks to mix upgrade, a high repeatpurchase rate of c30% and the continuous success in its hero productstrategy, which made up of 45%+ of the total revenue.
Recap on 4Q22. The results came in largely in line with its preannouncement,with revenue/ net profits growth for the quarter standing at 49%/ 52%,respectively. Proya had an exceptionally strong 4Q with growth significantlyoutperforming its peers who mainly see negative impacts from lockdowns.We attribute this to 1) share gain from peers, and 2) successful new brandlaunch (Hapsode).
Our TP and forecasts are under review.
