Price hikes expected to continue
? Vinda reported 1Q22 revenue of HK$4.6bn, up 2.2% yoy, and net profit of HK$344m,
down 37.8% yoy, below our expectations because w eaker sales because of the
pandemic rebound and a sales volume impact from the sales price hike in Dec 2021.
? Vinda is planning another round of meaningful and broader-based price increases in
2Q22F and multiple hikes in the full year.
? Reiterate ADD with a new DCF-based TP of HK$23.4.
Results below expectations amid the pandemic rebound
With the constant FX rate, 1Q22 sales were flat yoy. Tissue sales were HK$3.7bn in 1Q22,
down 0.3% yoy, while sales of personal care products were HK$913m, up 13.5% yoy. Ecommerce sales grew by 5.0% yoy in 1Q22, and the online sales contribution improved to
37% in 1Q22, from 36% in 1Q21. Organic sales growth in mainland China was down 1.9%
yoy because of low economy activity and low demand from both consumers and customers
from other channels amid the pandemic rebound in top-tier cities, which are Vinda’s
primary focus. Online sales contributed 45% of China sales. Because of continuing higher
costs of wood pulp, energy and packaging materials in 1Q22, Vinda’s 1Q22 gross margin
dropped by 5.8% pts yoy to 33.1%, offset partially by a price hike in Dec 2021, a product
mix upgrade, and a higher contribution from personal care products. Vinda’s 1Q22 SG&A
expenses increased slightly as it continued to invest in brand building, new channels, and
feminine care products. In the quarter, Vinda also faced slightly higher logistics costs amid
the pandemic rebound and traffic restrictions. Its 1Q22 operating margin declined by 5.9%
pts yoy to 9.8%, but improved by 1.1% pts qoq, making it the first qoq improvement in the
past four quarters.
Continued price increases expected in 2Q22F and FY22F
Vinda started to raise prices in Aug 2021, and it imposed the latest round of price hikes for
its w hole tissue product line in Dec 2021. As a result, in Jan–Feb 2022, it faced some
competitive pressure, as its major competitors did not follow the price hike. But the situation
changed in Mar 2022 as Vinda’s competitors started to raise their prices, and Vinda saw a
strong return in volume sales, indicating a successful price hike and providing more
confidence for Vinda to continue to raise prices in the coming quarters. Vinda is planning
another round of meaningful and broader-based price increases in 2Q22F and multiple
hikes in the full year.
Other measures to mitigate raw material cost pressure
The wood pulp price was back on an upward trend in the past month because of
uncertainties in the international situation and increases in overall commodity prices. To
cope with the rising raw material costs, Vinda will continue to improve the sales of its
premium and feminine care products. In 1Q22, Vinda’s high-end brand, Tempo, and wet
wipe products both enjoyed double-digit sales growth, and premium products accounted
for over 35% of the total revenue and China tissue revenue. Vinda will also improve its
operational efficiencies and will continue its disciplined spending. Meanwhile, overseas
markets, such as Malaysia, Singapore and Hong Kong, are relaxing the pandemic control
measures, which is expected to benefit Vinda’s overseas sales.
Reiterate ADD with a new DCF-based TP of HK$23.4
We cut our FY22–24F net profit forecasts by 5.8%, 4.2% and 4.1%, respectively, to reflect
the pandemic rebound impact on sales. We expect Vinda to benefit from improving demand
for premium tissue products, online sales expansion and sales recovery in overseas
markets, such as Malaysia and Korea, in FY22F. A key catalyst is a margin increase. A
key risk is a higher-than-expected w ood pulp price