SYG(SZ:300740) Xin Lang Cai Jing·2025-05-06 06:12Core Viewpoint - Water Sheep Co., Ltd. has consistently missed its performance targets over the past seven quarters, raising concerns about its strategic direction and financial health [1][2][6]. Financial Performance - In Q4 2024 and Q1 2025, Water Sheep reported revenues of 1.19 billion and 1.09 billion respectively, with year-on-year growth of 6.9% and 5.2% [1]. - The company's net profit attributable to shareholders for the same periods was 10 million and 40 million, showing declines of 86.8% and 22.8% year-on-year [1]. - The company has failed to meet its net profit targets set in its 2023 equity incentive plan, achieving only 290 million and 110 million against targets of 300 million and 400 million for 2023 and 2024 respectively [1][2]. Strategic Initiatives - Water Sheep has attempted to transform into a high-end beauty brand management group by acquiring luxury brands such as Ifidan and Perhejo, with the goal of becoming a global player in the high-end market [3][5]. - The company has labeled itself as a "newly emerging high-end beauty brand management group" following its acquisitions, despite lacking prior experience in luxury brand operations [5]. Market Position and Competition - In 2024, Water Sheep's revenue was 4.24 billion with a net profit of 120 million, contrasting sharply with competitor Proya, which reported 10.78 billion in revenue and 1.52 billion in net profit [6]. - The company has faced significant losses in its traditional mid-range brands, raising questions about its ability to sustain multiple high-end brands simultaneously [6][11]. Financial Health - As of Q1 2025, Water Sheep had cash and cash equivalents of 530 million against interest-bearing liabilities of 1.64 billion, indicating a precarious financial position [6]. - The company has recorded negative cash flow from investing activities over the past four years, totaling -1.01 billion, suggesting challenges in funding its expansion strategy [6]. Marketing and Sales Strategy - Water Sheep has invested heavily in marketing, with sales expenses reaching approximately 2 billion annually, yet the effectiveness of this strategy in establishing high-end brands remains uncertain [7][9]. - The company has adopted aggressive marketing tactics, including high-profile endorsements and premium retail placements, but these efforts may not guarantee long-term success in the luxury market [9].