Net profit attributable to shareholders of the company before non-recurring gains and losses reached the highest in 6 years, and the skin care products series jumped to the largest category

On March 16th, Shanghai Jahwa (600315. SH) released its 2021 annual results announcement. During the year, the company achieved operating income of 7.65 billion yuan, a year-on-year increase of 8.73%. The net profit was 649 million yuan, with a year-on-year growth of 50.92%, and the non-net profit was 676 million yuan, with a year-on-year growth of 70.76% , which was the highest level in recent six years. Among them, the annual growth rate of skin care products reached 22.22%, far exceeding the average growth rate of the industry, and the proportion of revenue was increased to 35%, which became the largest business category of the company.

Under the dual pressures of uncertainty in the external macro environment and rapid changes in the market and consumers, our company established and implemented a 123 Operation Principle that was consumer-centered, with brand innovation and channel advancement as two basic points and culture, system and process and digitalization as three boosters in 2021, namely, on the 123rd anniversary of the company. What’s more, it also overcome the short-term unfavorable factors of overseas and special channel business in the second half of last year. The brand side focused on beauty and skin care products, while the channel side was led by e-commerce, which was adjusted according to the established strategic direction and achieved good business results.

Brand innovation:

Focus on beauty cosmetics and skin care products, showing multiple research and development marketing highlights

In terms of product innovation, the company uses the new product development methodology led by consumer insight, deepens cooperation with TMIC of Tmall Innovation Center, enhances product innovation capability, and achieves initial results, specifically as follows: all single products of Herborist’s new Tai Chi skin source series enter the brand sales head SKU, and become the top five explosive products of brand e-commerce sales during the Double Eleven period; The Gross Merchandise Volumeof Dr.Yu’s new blue capsule essence exceeds10 million yuan in the first week of listing, and ranks first in domestic beauty on Tmall National Tide Day. Liushen's new Cyanine Shower Gel enhances the brand's competitiveness in shower gel category and its multi-point penetration rate in the young market. MAXAM's new fermentive rice series drives brand rejuvenation and city sinking, and reverses the downward trend in the past few years.

In the mean time, the sales proportion of the overall head products of private brands has increased slightly and the degree of aggregation has increased from 56% in 2019 to 71% in 2021 by focusing on hot items and streamlining SKU. The repurchase rate of Herborist Tmall flagship store and department store has increased from 33.7% in 2020 to 41.6% in 2021, and the repurchase rate of Dr.Yu Tmall flagship store has increased from 36.4% in 2020.

In terms of R&D, the company adheres to the principle of taking consumers as the center, relies on the whole process project management and the whole chain R&D model, and creates beautiful products and services with ingenuity. In the mean time, it also realizes technological empowerment from three dimensions: basic research, application innovation and product value shaping. During the reporting period, the Company submitted 82 new patent applications, with a year-on-year increase of 68%. By the end of the reporting period, the company had 374 authorized and valid patents, published 21 papers in mainstream journals in the industry, and participated in the formulation of 5 national standards or bank standards. In addition, the company also issued or formulated 19 group logos or landmarks, involving efficacy testing, safety assessment, raw material or finished product testing, digital transformation, etc., which achieves a year-on-year increase of 280%, thus reflecting the professional image of national benchmarking enterprises and ensuring the influence of regulations and standards.

In addition, the company constantly innovates marketing methods, and accelerates the rejuvenation of the brand, try to gain a stronger band influence through cross-border IP, and realizes cross-category innovation and brand value enhancement, so as to better meet the preferences and needs of the Z generation.

Dr.Yu teamed up with the well-known IP "China Aerospace Twelve Heavenly Palace" to enhance the brand image and top protection core proposition with the help of aerospace hot topics, and achieved a cumulative brand exposure of 140 million;

Gf worked closely with animation IP Doraemon to create an image of high-tech attributes, and achieved a cumulative brand exposure of 180 million brands.

In addition, through the innovation of the contents of livesrteaming, the total broadcast volume of Herborist’s Tik Tok livesrteaming room exceeded 13 million. During the reporting period, the proportion of Z-era people in Herborist and Dr.Yu increased by 62% and 25% respectively, thus fully optimizing the brand’s health.

Channel enhancement:

The e-commerce business has grown rapidly, and online and offline collaboration and integration are achieved.

In 2021, the company overcame the short-term adverse effects on overseas and special channel business in the second half of the year by making full use of five core measures, including strategic cooperation, digital empowerment, smart retail, private domain operation and model innovation, and comprehensively promoted the advancement of online and offline channels.

During the reporting period, the company's online business revenue reached 3.2 billion yuan, accounting for 42.04% of the revenue, and the online proportion was basically the same as that in 2020. Faced with the unfavorable situation of declining revenue of special canal, the company made up for the gap caused by the decline of special canal business through the rapid growth of e-commerce business. The company promotes the multi-platform layout of e-commerce with refined operation strategy, gradually reduces its dependence on a single platform, and strengthens its self-broadcasting business to enhance its operation capability, thus enriching e-commerce formats. In 2021, the company operated a total of 82 stores on major e-commerce platforms, among which Tmall flagship store platform improved its operational capability while maintaining steady growth as a whole by strengthening the layout of stores for self-broadcasting. After optimization and adjustment, the company's business on JD.COM platform achieved rapid growth and turned losses into profits. The first batch of stores of the company on Pinduoduo platform were shortlisted for the "Super Nova Project", and the rapid growth of business was realized by innovating and exploring new ways of playing people and goods yards through the interest e-commerce platform. In addition, the company set up a livestreaming center with a cumulative livestreaming time of 18,000 hours, which greatly promoted the company's We Media livestreaming business. Meanwhile, it actively expanded the special canal on multiple platforms and actively transformed into retail business.

During the reporting period, the Company's offline business maintained steady growth. The new retail business expanded rapidly, which achieved a year-on-year growth rate of over 100%, and accounted for over 10% of domestic offline business. Its original offline business in supermarkets, department stores, CS and other channels were successfully shifted into the online business through home, store and cloud store, reducing the impact of the decline in offline traffic caused by COVID-19 epidemic. Secondly, the department store channel actively improved the optimization efficiency. By the end of the year, there were 866 existing counters and stores. Moreover, it successfully turned losses into profits through the online SPA business in the four seasons. Thirdly, the profitability of CS channel has been significantly improved through the reconstruction of traditional CS and Watsons' profit increase.

The company also actively built an online and offline integrated private domain, and conducted refined communication among users in the whole domain, thus accumulating over one million users and more than 9,000 private domain communication groups. Meanwhile, it also built a one-to-one communication channel for VIP clients,which gradually improved the overall user experience, and increased the value of users in the whole life cycle by 16%.

Organizational culture, system processes, and ESG:

Boosting sustainable development

During the reporting period, the Company actively shaped the corporate culture, broke ice among departments, strengthened organizational coordination, and continuously improved cohesion and centripetal force. The company also shared the changes of the enterprise with employees through information transmission platforms such as family cloud party, birthday party and home newsletter, so that employees could receive the latest activities and policy information of the company in time. In addition, the company launched an innovation platform, which accumulated internal innovation ideas by taking the innovative ideas of grass-roots employees as an entry point. At the end of last year, the company's headquarters moved to a new workplace to establish a more open and collaborative workplace environment. In 2021, the company's management engagement increased by 17%, and the satisfaction of all employees increased by 3.9%.

An efficient and intelligent systems and processes with dedication was created by the company by starting from the infrastructure level and application system level, on the one hand, the information security system is constantly chanced, on the other hand, the process processing efficiency at all stages of the company were optimized. In addition, the company continuously promoted digital transformation, made full use of enterprise WeChat platform through data sharing and visualization, improved information flow efficiency and data manageability, and created more convenient internal communication and management channels.

During the reporting period, the medium-and long-term strategic planning outline of ESG was officially released by the company. It formulated the "double carbon goal" ahead of the country, and deeply integrated it with the company's operation.

In terms of environment,the company promoted the realization of green and low-carbon goals by focusing on product life cycle management in 2021.

In the social aspect, the Company is committed to creating shared and win-win value for relevant stakeholders, actively giving back to the society, and pursuing deep cultivation in public welfare undertakings such as emergency rescue, rural revitalization, caring for women and vulnerable groups. The total value of donated materials in the whole year is nearly7 million yuan.

In terms of governance, the company successfully promoted the diversification of the board of directors, Representatives of female independent directors have been added, and the responsibilities of professional committees of the board of directors have been expanded. The Strategy Committee and Audit Committee have been renamed as Strategy and Sustainable Development Committee and Audit and Risk Management Committee respectively, and internal integrity education has been strengthened, and an anti-money laundering management system has been established to safeguard the legitimate rights and interests of shareholders of the company.

Greater efforts are needed before the company can attain the goal in 2022, and its corporate strategy plans to enhance comprehensively.

In 2022, the company's 123 Operation Principle will be comprehensively upgraded and iterated. The company will continue to enhance and improve the consumer experience from the two directions of products and services, and the R&D methodology will be advanced from 1.0 to 2.0, and multi-dimensional data cooperation will be conducted with many commercial platforms to drive the company's product R&D and create better products for consumers. In terms of the brand innovation, it will establish a clear and unique positioning and value, and try to gain a stronger band influence, build a new marketing matrix through cross-border IP, explosive word-of-mouth and content innovation of livestreaming, so as to set a new benchmark for the industry. In terms of advanced channels, the company will realize deep integration and synergy between online and offline businesses. In addition, the company will continue to improve the organizational atmosphere and build an efficient digital intelligent system, so as to make itself become a quantifiable, visual and optimizable organization. Besides, it will comprehensively promote the ESG strategy in the dimensions of green and low-carbon environmental ecology, shared win-win social values and better corporate governance.

Looking forward to 2022, Shanghai Jahwa will continue to forge ahead around the "123 Operation Principle", reinforce its business, create greater value for consumers, employees, shareholders and society by virtue of its excellent technology and products, high-quality service experience, strong brand influence and profound corporate culture, and finally rise abruptly based on its accumulated strength and carry forward Chinese beauty to the whole world.