Headwinds endure
贝泰妮(300957)
Botanee made a pronounced come-back year-to-date, reviving Tmall GMV from-59.8% YoY to -6.9% YoY between Jan and Oct, and accelerating its quarterlysales growth from 7% in 1Q to 26% in 3Q. Year-to-date shares performance hasgone against this trend and, in our view, the free-fall is running ahead ofconsensus estimates which still looked rather reserved in pricing-in the ongoingdilemma that Botanee is facing. These are threefold: 1) when macro headwindssuch as consumption trade-down (see our thematic report) and low fertility wishlinger (see our Feihe downgrade report), growth outlook among AOXMED(super high-end) and Winona Baby could normalise sooner than expected, andBotanee’s single-brand risk could be exposed further given a full-fledged closequarters competition among brands; 2) herbal-/HA-based functional skincare isincrementally crowded out by the collagen-based. While Botanee’s portfolioremains largely herbal-based, we also see uncertainties residing with itscollagen debuts, amid a languishing consumption sentiment, which offer lowerefficacy (homology level) relative to peers; 3) the top-line-accretive buy-out ofYuejiang could ironically be margin-dilutive considering a higher salescontribution from colour make-up, and the late migration of P&M to livestreaming might not be as rewarding when the low-hanging fruit is gone. Albeittransient, these concerns could put Botanee in the doldrums until we are givenany tangible roadmap that substantiates a turn-around. While we are stillcautiously optimistic and are looking for a 7.6% broad-base cosmetics salesgrowth for 2024E (in line with TSR), we recommend Proya (603605 CH, BUY)and Giant Biogene (2367 HK, BUY, covered by our Healthcare team) whichpossess solid brand/technology moats. We downgrade Botanee to HOLD, andexpect the shares to generate market-performing return in the next 12 months.
Major earnings assumptions. To Botanee, headwinds above couldfinancially morph into decelerated organic top-line growth (14.5% CAGRbetween 2022-25E), mix-diluted gross margins (an average 0.2pp declinep.a.) and a persistently inflated promotional expense (+1.2pp in sellingexpense-to-revenue ratio). These in aggregate prompt us to trim our 2023-25E net earnings by 19-22%, and put us 12-16% below consensus. Ourforecasts include the takeover impact of Yuejiang.
Valuation. Botanee has wrapped up its upcycle with ~50% YoY salesgrowth per annum. To bake in a normalising growth expectation, we rebaseour long-term average starting from 3Q22 (from previously since IPO). Ourrevised TP is based on 31.0x (from previously 48.5x) end-23E P/E, whichstill represents -1sd below the average.
