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上海家化(600315) 3Q results largely in line, with revenue and net profits standing at RMB1.6bn (+1.2% YoY) and RMB156mn (+15.5% YoY). Consider a 4% YoY domestic revenue growth, total revenue increased by 3.5% YoY at constant exchange rate. The growth (vs a 23.8% decline for 2Q) was much underpinned by a 30% YoY growth in HPC revenue, which mitigated a 15%/ 5% decline in skincare/ Babycare revenue. Of note, HPC recorded a 17.9% ASP uptake, followed by 10.3% in babycare. By channel, offline sales grew 6%. Margins trajectories diverged. GPM declined QoQ by 2.0pp to 54.3%, owing to higher contribution of lower-margins SKU. This is despite an average 5% lower input cost (mainly palm oil) that equivalent to a RMB400/ton procurement cost savings. That said, operation cost initiatives had brought down opex ratio of the quarter by 7.5pp to 45.6%, leading to a 3.2pp expansion in operating margins to 8.3%. With these, we continue to envisage 4Q margins trajectories to normalize, and the worst of Jahwa is behind us. A lukewarm Double.11 expectation: September social retail sales came in at 2.5% YoY growth to RMB377.5bn, below 2.9% of market consensus.Cosmetic sales was RMB31.7bn, down 3.1% YoY, with 9M sales declining 3% YoY. A softening consumption sentiment has prompted for a lower expectation of the upcoming Double.11, in our view. Of note, online cosmetic retailers reportedly expect a 5-10% YoY sales decline, according to our channel check and survey. Meanwhile, at the expense of Korean and US/ European brands, we think domestic brands could gain market share by leveraging their hero product strategy. Revised 2020 ESOP targets: During 2Q results, Jahwa management has revised down the revenue/ net profits target for 2022-23E/ 2023E,respectively. The revised targets imply +10.2%~+24.7%/ -16.6%~+38.4% YoY revenue/ Net profits growth in 2H22 and -1.9%~4.6%/ -29.0%~+1.8% YoY revenue/ Net profits growth in 2022E. Management targets at least DD topline growth and higher bottom-line growth in 2H22, and an accelerated topline growth in 2023E. Our current 2022E forecast is at par to the B Target of Jahwa’s revised 2020 ESOP plan, while that of 2023E is slightly below. We keep our earnings forecasts and TP for now. We value the shares at an unchanged 40x mid-23E P/E which represents mean valuation since 2019.
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（以下内容从招银国际《3Q largely in-line; FY earnings track well to the ESOP target》研报附件原文摘录）上海家化(600315) 3Q results largely in line, with revenue and net profits standing at RMB1.6bn (+1.2% YoY) and RMB156mn (+15.5% YoY). Consider a 4% YoY domestic revenue growth, total revenue increased by 3.5% YoY at constant exchange rate. The growth (vs a 23.8% decline for 2Q) was much underpinned by a 30% YoY growth in HPC revenue, which mitigated a 15%/ 5% decline in skincare/ Babycare revenue. Of note, HPC recorded a 17.9% ASP uptake, followed by 10.3% in babycare. By channel, offline sales grew 6%. Margins trajectories diverged. GPM declined QoQ by 2.0pp to 54.3%, owing to higher contribution of lower-margins SKU. This is despite an average 5% lower input cost (mainly palm oil) that equivalent to a RMB400/ton procurement cost savings. That said, operation cost initiatives had brought down opex ratio of the quarter by 7.5pp to 45.6%, leading to a 3.2pp expansion in operating margins to 8.3%. With these, we continue to envisage 4Q margins trajectories to normalize, and the worst of Jahwa is behind us. A lukewarm Double.11 expectation: September social retail sales came in at 2.5% YoY growth to RMB377.5bn, below 2.9% of market consensus.Cosmetic sales was RMB31.7bn, down 3.1% YoY, with 9M sales declining 3% YoY. A softening consumption sentiment has prompted for a lower expectation of the upcoming Double.11, in our view. Of note, online cosmetic retailers reportedly expect a 5-10% YoY sales decline, according to our channel check and survey. Meanwhile, at the expense of Korean and US/ European brands, we think domestic brands could gain market share by leveraging their hero product strategy. Revised 2020 ESOP targets: During 2Q results, Jahwa management has revised down the revenue/ net profits target for 2022-23E/ 2023E,respectively. The revised targets imply +10.2%~+24.7%/ -16.6%~+38.4% YoY revenue/ Net profits growth in 2H22 and -1.9%~4.6%/ -29.0%~+1.8% YoY revenue/ Net profits growth in 2022E. Management targets at least DD topline growth and higher bottom-line growth in 2H22, and an accelerated topline growth in 2023E. Our current 2022E forecast is at par to the B Target of Jahwa’s revised 2020 ESOP plan, while that of 2023E is slightly below. We keep our earnings forecasts and TP for now. We value the shares at an unchanged 40x mid-23E P/E which represents mean valuation since 2019.
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