3Q rev/np -11%/40%; a significant miss

（以下内容从招银国际《3Q rev/np -11%/40%; a significant miss》研报附件原文摘录）
上海家化(600315)3Q revenue/net profits came in at RMB1.5bn/93.1mn, down 11%/40% YoY. In our view,the mediocre result was an expected extension of 2Q, in which overseas businessremained a lingering drag as a result of a persistently high inflation environment thateroded consumption power. Other than this, the growth of domestic business alsoshowed a sign of tapering in the absence of a favourable base comp. By channel, saleson online platforms grew by low-teen, but such was not able to fully mitigate thechallenging offline business. By segment, skincare and HPC sales decreased by8.5%/18.3% YoY, tumbling from positive growth of 26.5%/4.5% in 2Q. The only positiveof the result was a mild uptick in GPM, thanks to input cost savings and brand mixupgrade. Considering also a relatively soft pre-sales momentum of the Double 11 thisyear, in our view, Jahwa looks unlikely to flip the downtrend in the remainder of the year.Maintain HOLD.
Conference call takeaway. 1) Jahwa announced its restructuring plan alongwith 3Q results, merging the skincare BU with the mother-care BU, and setting upan overseas BU. This adjustment aims to enhance the online presence of thesegments and streamline decision-making processes across products teams; 2)3Q opex surged mainly on operation deleverage, and the company continued itsinvestment in brand to boost future growth. Some ongoing tactics include consumeracquisition through targeted and pop-up marketing events. Other notable marketingevents, such as Yuze Douyin Day and Bai Cao Ji Member Day etc, 3) key numbersfor the quarter include, domestic/overseas 9M sales fell 3.6%/9.3% YoYrespectively; and 9M/3Q online sales growth reached 6%/7%. Domesticonline/offline sales +14%/-9% YoY, of which department stores saw -30% YoY.GMP edged up 3.5 pct. YoY to 57.7% in 3Q as skincare products sales growthresulted in structural mix effect. According to management, overseas inventorylevel decreased significantly thanks to normalized production cycles.
Double 11 pre-sales. Anecdotal observation from the livestreaming of leading KOLpointed to a relatively soft start for the event. Domestic brands performancediverged on the first day. Proya tops the GMV league with double-digit growth with16 participating SKUs (a double of 2022), while that of Botanee halved (withunchanged 8 SKUs); while that of Jahwa looked immaterial.
Earnings change. We cut our 2023E revenue by 13.7% to factor in the 3Q result.Our GPM estimate is largely unchanged, but with a ~3.0pp increase in opex ratioupon an operation deleverage, our net income is 37.9% lower.
Valuation. Our revised TP is based on 29.0x end-23E P/E which still represents -1sd below average since 2019. Our target multiple is set lower than that of Proya(at long-term average) to reflect the difference in growth outlook, strategy executionand our preference