According to a research report issued by CICC, 02298.HK issued a profit warning for fiscal year 2021. According to its operation in the first 11 months of this year, the annual loss is expected to be no less than 450 million yuan, and the loss is expected to expand by 330 million yuan year-on-year. The results were lower than the bank's expectations, mainly due to weak terminal sales, higher prices of raw materials and continued expenses.
The bank pointed out that repeated outbreaks in some parts of the mainland in the second half of this year, superimposed by repeated floods, torrential rains and power shortages, affected consumers' income expectations and reduced their willingness to spend. During the period, the return of urban beauty increased, and the retail income was lower than expected. The annual decline in gross profit margin was mainly due to the rise in raw material prices in the second half of the year. In terms of costs, the expense rate has all increased due to the improvement of incentive plans for franchisees and employees, the launch of extensive promotional activities, the increase of senior management and consulting fees, and so on. At the same time, the overall increase in inventory provisions and right-to-use asset provisions in the second half of the year increased the net performance loss to more than 450 million yuan.
In addition, the bank believes that Urban Beauty is currently in a strategic transition, and the bank expects positive changes in its products, channels, brands and organizations in the long run. But in the short term, it will take time for the investment to be large and the results of the reform to show. At the same time, considering that the point outbreak of the epidemic still has an impact on offline passenger flow and there is uncertainty in terminal demand, the company has lowered its net loss forecast for this year to 460 million yuan, and its net profit forecast for 2022 by 18.7% to 140 million yuan. Maintain the "neutral" rating, with the target price cut by 27.1% to 0.59 yuan.