Net profit after deducting non-recurring gains and losses is creasing all the year, Q4 performance is significantly improved, Shanghai Jahwa’s change have achieved remarkable results in 2020

In the evening of 2nd February, Shanghai Jahwa United Co., Ltd (SH.600315) (referred as Shanghai Jahwa in the following ) disclosed the annual financial report in 2020. With the long-term strategic support of major shareholders, the company has established goals and action plans for the next three years. The report shows that the company realized operating income of 7.03 billion Yuan, realized net profit attributed to the parent company of 430 million Yuan, realized net profit after deducting non-recurring gains and losses of 396 million Yuan, an increase of 4.3% year-on-year, and realized operating cash flow of 643 million Yuan, an increase of nearly 20% year-on-year in 2020. 

There is a reform and adjustment of the company in 2020. In the first half of the year the company was affected by the epidemic. Under the leadership of the new Chairman and CEO, the company actively adjusted its operating policy and business structure, continuously optimized the rate, and achieved a quarterly recovery in the third and fourth quarters in the second half of the year. Especially in the fourth quarter, the company’s net profit increased by 609% year-on-year, and net profit after deducting non-recurring gains and losses increased at a super-fast year-on-year. Profitability increased significantly; Sales expenses and management expenses fell for the first time in many years. At the same time, the operating indicators such as receivable and inventories achieved a year-on-year decline, and the operating cash flow achieved an overall improvement. At the same time, in the background of increasingly severe overseas epidemics, the company's overseas business relied on its e-commerce business to actively transform and achieve growth against the trend.

Focus on Consumers and Promote Brand Innovation

In 2020 Shanghai Jahwa promoted brand innovation and established a methodology based on consumer insights. Through the judgment of consumer demand trends the company discovered industry category development opportunities, determined differentiated brand development strategies, and divided existing brands into fast development categories, subdivide champion categories, and subdivide leading categories. During the reporting period, among the key development categories, the functional skin care brand- Dr. YU continued to strengthen the co-creation of medical research, strengthened brand equity, supplemented by live marketing and continuous optimization, and achieved three-digit rapid growth; Research-level skin care brand-Herborist Derma gradually independent operated, achieved rapid growth in Watsons channels during the reporting period; VIVE launched a new brand image and achieved high double-digit growth under the vigorous promotion of e-commerce; Herborist actively promoted strategic adjustments, sorted out product structure, and reduced stores strategically . Among the subdivided champion categories, Liushen continued to consolidate its position as the champion in the florida water market and maintained its market share; Giving expanded its target consumers to children and pregnant women, and its e-commerce share reached a new high in the past two years in December; Gaofu sorted and simplified its production line to increase the proportion of the blue line - high-end men’s skin care product lines. Among the subdivided leading categories, Homeaegis launched a variety of antibacterial and antibacterial products in response to the epidemic, and achieved double-digit growth; Maxma launched a yeast rice series with Le fusion fermentation technology, which was welcomed by young consumers. 

At the promotion level of brand innovation and product innovation, the company focuses on head products, gradually reduces long-tail products in existing products, and sorts out products under research to clarify the product lines that each brand needs to iteratively compensate, and through multi-dimensional consumers qualitative and tests to determine the concept, packaging, formula, experience and price of the new product. Adhering to the spirit of ingenuity, the company continues to innovate in basic research, raw material development, standard formulation, formula development, etc., invested funds to build a new independent fermentation technology hardware platform, independently developed a series of effective raw materials and successfully applied them to products, and continued to deepen and international Well-known raw material suppliers cooperate to obtain cutting-edge raw material technology for the first time, deeply promote "medical research co-creation" and make breakthroughs in clinical projects. During the reporting period, the company obtained 4 new national authorized invention patents, and submitted 18 new invention patent applications and 33 design patent applications. In terms of marketing innovation, the company introduced a big data platform and established a DBPI (Brand Digital Asset Index) system to analyze brand investment efficiency, focusing on the innovation of marketing and resource deployment models, and continuously improving the input-output ratio of marketing.

Deepen Channels to Advance Products, Reduce Fees and Improve Performance

In terms of sales channels, Shanghai Jahwa will actively improve its e-commerce operating capabilities in 2020, strategically shrink department store terminals, and deploy offline new retail businesses to lay the foundation for sustainable development.

On the online channel, the e-commerce team has actively improved its data-based operation capabilities to help the company's brands achieve better growth during Double Eleven and rank among the forefront of local beauty and skin care products. In the third quarter, the company actively adjusted the e-commerce business structure, optimized the frequency and proportion of live broadcasts, cultivated live broadcast talents within the company, formed a three-dimensional way of combining super head + mid-waist KOL + store self-broadcasting, and adjusted the balance between brands Live broadcast resources have significantly improved the profitability of e-commerce businesses. In 2020, the company's online channel revenue will continue to increase, which will bring the company more efficient growth points in the future.

In the offline channel, the company embraces new retail on the one hand, and promotes the online business of offline business through the cloud mall, Jahwa ambassadors, and Dajia platform. On the other hand, the company optimizes and adjusts traditional channels to closed and downsized the department store strategically and low-yield counters and stores and improve the efficiency of single stores; CS channel improves shipments by solving historical problems and focusing on store execution. After sorting out various channels, the company has achieved a reduction in sales rates in many channels in 2020.

Optimization of Business Indicators, Reform and Adjustment are Effective

In June 2020, after Alex Pan, the Chairman and CEO of Shanghai Jahwa took office, he established the new business policy of “consumer-centric, brand innovation and channel advancement as the two basic points, and process, culture and data as the booster". The company continues to promote the implementation of operating policies, focusing on consumer needs for brand innovation and using technology to advance channels. From the 3rd to the 4th quarter of 2020, the company's various operating indicators have been continuously optimized, and the adjustment and reform have achieved initial results. During the reporting period, sales expenses and administrative expenses also achieved the first year-on-year decline in many years. After the company’s receivables, inventory and other indicators reached their peaks in the middle of the year, they subsequently fell to the year-end lows, which embodied the company's commitment to create a win-win atmosphere for the entire external ecological chain. As for the internal, the company promoted multi-dimensional cultural changes, all employees jointly participated in and formulated the vision, mission, and values of the future company, and launched many "employee care" activities to further enhance the cohesion. In addition, the company has also launched an equity incentive plan to deeply bind the interests of the management team to the company's performance. According to the planned assessment objectives, the company is expected to achieve steady growth in revenue and a significant increase in profit in the next three years.

It is the 20th anniversary of Shanghai Jahwa’s landing in the domestic A-share market in 2021. The company will take this as a new starting point for development, and carry out reforms around the two keywords of “focus” and “simplification”, focusing on ten projects of promoting innovative and explosive product creation, Herborist revival, and gross profit, inventory management optimization etc. The company will improve the business visibility and overall efficiency of the overall organization through continuous digital empowerment and system process simplification, and greatly enhance employee cohesion and combat effectiveness through positive cultural transformation.