(Report producer/analyst: Ma Li, Zheshang Securities)
1 Oriental Selection FY2023 Financial Report Commentary: Live streaming e-commerce drove a high increase in revenue and profit throughout the year
Affected by the rapid growth of live streaming e-commerce, the overall high growth of FY2023 will be driven. Oriental Selection FY2023 achieved operating income of 4.51 billion yuan (+651% year-on-year), of which the live streaming e-commerce business achieved revenue of 3.88 billion yuan (year-on-year +15689%), and the university education sector and institutional business segment in the education business achieved 590 million yuan and 40 million yuan, respectively, +14.2% and -34.7% year-on-year; FY2023 net profit attributable to the parent will reach 970 million yuan, if the equity incentive (about 100 million yuan) and other expenses are excluded, the non-GAAP net profit of Oriental Selection will achieve 1.09 billion yuan (year-on-year +890%), corresponding to a profit margin of 24%.
The GMV of live streaming e-commerce exceeded 10 billion for the whole year. According to the company's announcement, Oriental Selection FY2023 live streaming e-commerce business will achieve GMV of up to 10 billion yuan (48/5.2 billion in the first half of the year); The number of orders paid on FY2023 Douyin is 136.3 million, and the unit price is about 73 yuan. According to gray dolphin data, Oriental Selection has a GMV of about 11.1 billion returns, and the return rate is about 10%, outperforming its peers (the industry average is 30%-50%).
Among them, the revenue of self-operated products exceeded 2.6 billion yuan, and the commission rate of our consignment products launched by Oriental Selection was about 17%-18%. (Note: commission rate = (live e-commerce revenue - self-operated product revenue) / consignment GMV).
The increase in the proportion of self-operated affects the comprehensive gross profit margin, and there is still room for improvement in the gross profit margin of non-self-operation. The comprehensive gross profit margin of FY2023 live streaming e-commerce business was 38.2%, of which FY2023H1 and H2 were 42.5% and 34.7% respectively, and the change in comprehensive gross profit margin was mainly affected by the increase in the proportion of self-operated product revenue.
Oriental Selection FY2023 self-operated product revenue exceeded 2.6 billion yuan, of which FY2023H1 and H2 achieved 1 billion yuan and 1.6 billion yuan respectively, accounting for 57% and 76% of the live streaming e-commerce revenue, respectively. The agency business is asset-light operation, the gross profit margin is higher than that of the self-operated business, and the increase in the proportion of self-operation affects the comprehensive gross profit margin of the live streaming e-commerce business. For the gross profit margin of self-operated products, large items such as grilled sausages (sales of 100 million + roots) have been successively created, and there will be a certain improvement in the future with scale effects.
The live streaming e-commerce team expanded and maintained strong profitability. Oriental Selection FY2023 non-GAAP net profit/live e-commerce GMV is about 10.9%, and the profit margin in the first and second half of the year is 12.5%/9.4% respectively, we believe that on the one hand, it is affected by the cost increase caused by the rapid expansion of the live e-commerce team (the FY2023 live e-commerce team has reached 1103 people); On the other hand, it is also affected by foreign exchange, the exchange rate in the first and second half of the year was 96.62 million / -17.94 million, if the impact of exchange is deducted, the GMV level in the first and second half of the year is 10.5%/9.7% respectively, and the profitability is still strong.
2 Ensure efficient organizational ability, and look forward to the continuous iteration of new species
2.1 Douyin live broadcast: The matrix number continues to fission, and beautiful life becomes the second growth curve
The main account of Oriental Selection is affected by the off-season and diversion of the industry, and is under pressure in stages. According to gray dolphin data, the main account of Oriental Selection FY2023GMV about 7.69 billion yuan. Affected by the off-season of industry sales and the development of APP/matrix number diversion, the main account GMV of Oriental Selection has recently come under pressure. From the perspective of GMV driving factors, the average daily field view tends to bottom out, and the UV value rises steadily.
Looking forward to FY2024, the main account of Oriental Selection can still continue to innovate on the content side and product side to ensure the basic disk of Douyin live broadcast. On the content side, carry out local special good product recommendation and traceability live broadcast activities to create certain content differentiation; On the product side, operations are continuously improved and pallets are optimized, thereby increasing sales conversion rates.
The Beautiful Life account has performed brilliantly and has become the second growth curve of the Douyin channel. According to gray dolphin data, the account FY2023GMV of Oriental Select Beautiful Life is about 1.63 billion yuan. Over the past 23 years, the average daily GMV of Beautiful Life from January to July was 4.59 million/5.34 million/5.56 million/6.04 million/8.55 million/7.49 million/7.88 million, showing a rapid growth trend.
Beautiful life sales categories cover beauty, home appliances 3C, daily necessities, clothing, etc., the market space is broad, the future growth driver mainly comes from: (1) beauty and other biased products, the attraction to consumers mainly comes from price & brand, beautiful life is currently in the "scale expansion - bargaining power improvement - product discount and richness improvement - drive sales" positive cycle, upward development potential is strong; (2) Oriental Selection has 3000+ million fans of the main account, and Beautiful Life can be drained with the help of the publicity of the main account, and the fan group is reused to fully tap the consumption potential.
Build a multi-category live broadcast matrix to drive the overall GMV growth of Douyin live broadcast. According to the gray dolphin data, the GMV of Oriental Selection's self-operated product number, book number, will enter wine and see the world FY2023 is 250 million yuan, 290 million yuan, 180 million yuan and 420 million yuan, respectively. Among them, Kan World account has become the next key direction of strength, combining with scenic spots in various places, content innovation to attract traffic, while selling cultural tourism and local characteristic agricultural products, effectively combining high-quality content with product sales. With the continuous improvement of the anchor team + supply chain, there is still room for expansion of the matrix number.
2.2 Self-operated products: adhere to the strategy of self-operated products, and increase the proportion of shelves
Continue to make efforts to make efforts in its own brand products, and repurchase drives the proportion of shelves to increase. With the continuous expansion of self-operated SKUs (120 models launched in FY2023), superimposed on the creation of popular products such as grilled sausages and prawns, the revenue of self-operated products in FY2023 exceeded 2.6 billion yuan. By the end of May 23, Oriental Selection self-operated products and live broadcast team reached 1103 people, including 346 supply chain and product teams; At the same time, Oriental Selection has also built a research and development platform for self-operated products - Nutrition Research Institute, and the expansion of team talents has effectively ensured the development of self-operated products.
With high quality and high cost performance, Oriental Selection of self-operated products attracts consumers to continue to repurchase. According to Oriental Selection Douyin stores, the number of repurchases of popular products grilled sausages, toast bread and chicken breast reached 210,000+, 210,000+, and 140,000+ respectively. With the increase in demand for repurchase, consumers not only buy in live broadcast channels, but also the proportion of self-operated products in shelf channel sales is also increasing.
2.3 APP: Develop new channels in the private domain to effectively undertake repurchase needs
The APP took advantage of the trend to go out of the circle, driving a high increase in downloads. On July 26, the live broadcast room of "Oriental Selection of Self-operated Products" announced that it would be closed for three days, in order not to affect the customer's consumer experience, the company temporarily decided to carry out 8.5% discount promotion of self-operated products on the APP, which aroused widespread attention and spread, driving the download volume and GMV of the Oriental Selection APP to increase. According to Qimai data, as of August 25, the cumulative number of downloads of the Oriental Selection APP reached 7.15 million, of which 4.69 million have been downloaded since July. According to Oriental Selection Official Weiwei, the total sales of APP exceeded 110 million yuan during the period from 7.26 to 7.29.
The new version of the APP is a new channel for the development of private domain to undertake repurchase needs. Oriental Selection launched a new version of the APP in July and launched the live broadcast function, which can give full play to the advantages of Oriental Selection in terms of content and seek differentiated development. At the same time, the APP integrates live broadcast and shelf scenes to "select good things" for consumers, and is expected to undertake the repurchase function of consumers. According to the company's announcement, Oriental Selection will launch a membership card in the future to provide consumers with more preferential products and services. At present, the number of paid members in China has exceeded 4 million, and Oriental Selection also has a lot of room for development in the exploration of the paid membership system, further tapping consumption potential and improving stickiness.
2.4 Taobao Live: The platform expands another city and opens up development space
Taobao Live is about to debut, opening up space for development. According to the Oriental Selection Official Weiwei, led by Teacher Yu and Dongfang Xiaosun, Oriental Selection will come to the Taobao platform for the first time on August 29. Taobao Live has also become the third layout direction after Douyin Live and APP Live broadcast. On the day of the live broadcast, there will be more than 300 selected good items, and many preferential activities such as "Million Pet Pink Packet Rain", "10 Million Subsidies for Home Appliances", and "28% Off Self-operated Products" will be carried out.
The combination of Oriental Selection "content" and Taobao "goods" is expected to quickly become the head live broadcast room of Taobao Live.
1) The shelf e-commerce represented by Taobao has vigorously introduced content anchors, and traffic distribution has also shifted from "transaction" to "transaction + content", and Oriental Selection relies on its high-quality content creation ability (such as creating outdoor special venues), strong potential and recognition (the total number of fans of Douyin matrix number is 40 million+), which is in line with Taobao's current strategy of increasing content.
2) Different from the mental strategy of Li Jiaqi, the head anchor on Taobao, in the field of beauty cosmetics and Luo Yonghao's 3C field of home appliances, Oriental Selection continues to make efforts in self-operated products, and has unique advantages in the field of food and beverage with high repurchase.
3) As a domestic e-commerce leader, Taobao has a more complete supply chain system to provide high-quality product support for Oriental Selection Live Broadcast.
Referring to the development of other live broadcast rooms on Taobao, the increase in Taobao Live contribution is worth looking forward to. Taobao anchors concentrated on the head, according to "Late", Li Jiaqi's GMV in 2022 exceeded 65 billion yuan. In addition, the performance of the new anchor is also eye-catching, Luo Yonghao premiered on Taobao on October 24, 22, with a cumulative number of 26 million viewers in the live broadcast room on that day, and the total amount of goods is expected to be about 210 million yuan (estimated by the third-party platform Xinjiang). According to the TVB announcement, TVB Taobao Live reached 23.5 million, 73.2 million and 1+ billion yuan on March 7, March 30, and May 31, 23, respectively.
3 Earnings forecasts and valuations
From the live broadcast of the APP in July to the debut of Taobao Live on August 29, the underlying driving force for the accelerated iteration of new species lies in the rich organizational capabilities and resources that Oriental Selection has accumulated.
With the fission of Douyin matrix number (beautiful life has become the second growth curve), continuous efforts in self-operated products, Taobao Live to bring increments, and APP to expand the private domain, we still have confidence in the sustainable growth of Oriental Selection.
We expect that the net profit of FY2024-FY2026 will be 9.8/13.4/1.76 billion yuan, respectively, and the corresponding PE will be 44x/32x/24x, respectively; Adjusted net profit (excluding equity incentive expenses) was RMB13.3/16.0/RMB1.86 billion, corresponding to PE of 32x/27x/23x, respectively.
4 Risk Warning
1) Risk of data bias: The data used in this paper mainly comes from third-party statistical platforms, which may be deviated from the actual situation.
2) Intensified industry competition: The live streaming e-commerce industry is developing rapidly, and with the increase of industry participants, the overall industry competition intensifies.
3) The development of new business is not as expected: the company's new business development requires large-scale upfront investment, there are many uncontrollable factors such as capital and manpower, and the speed of new business development is not as fast as expected.
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