Proya(SH:603605)2024-10-27 16:26Investment Rating - The report assigns a "Buy" rating to Proya Cosmetics with a 12-month price target of RMB 107.50, implying an upside of 8.6% from the current price of RMB 99.00 [2][7][11]. Core Insights - Proya reported a 21% year-over-year growth in revenue and net income for 3Q24, aligning with market consensus, but operating profit fell 13% below expectations due to ROI pressure from increased KOL mix and product returns [2][11][12]. - The company is adopting a disciplined promotion strategy for the upcoming Double 11 sales event, which is expected to stabilize ROI despite a tougher sales environment [2][3][11]. - The forecast for 4Q sales and net income growth has been lowered to 25% and 22% year-over-year, respectively, reflecting recent trends and leading to a slight cut in 2024-26 net income estimates by 3% [2][11][12]. Summary by Sections Earnings Review - 3Q24 sales reached RMB 1,964.6 million, a 21.2% increase year-over-year, but 3% below Goldman Sachs estimates [4][11]. - Operating profit was RMB 342.8 million, a slight decrease of 0.6% year-over-year, and 16% below expectations [4][11]. - Net profit attributed to equity shareholders was RMB 297.5 million, up 20.7% year-over-year, but 8% below estimates [4][11]. Sales Performance - Online sales increased by 34% year-over-year, accounting for 94% of total sales, while offline sales declined by 52% [11][12]. - Skincare and cleanser sales grew by 21% year-over-year, while makeup sales increased by 19% [11][12]. Margin Analysis - Gross margin declined by 1.9 percentage points year-over-year to 70.7%, primarily due to higher product return rates and a greater mix of KOL livestreaming, which typically has lower margins [11][12]. - Selling and distribution expenses rose by 29% year-over-year to RMB 892 million, reflecting higher ROI pressure [11][12]. Future Outlook - The company anticipates an acceleration in sales during the upcoming promotion period, supported by top-tier KOL livestreaming lineups [2][3]. - The report highlights the importance of the upcoming results briefing for insights on 4Q24 sales and margin outlook, product roadmap, and potential M&A opportunities [3][11].