30 Mar 2023

NFI’s FY22 topline was up by 6.8% YoY to Rmb1,719m. Offline sales, which accounted for 657.8% of FY22 sales (FY21: 63.5%), recorded a 2.9% YoY drop last year on the back of i) 18.4% YoY drop in concessionary counter sales to Rmb814m due to the negative impact from pandemic, offset by ii) a 620% surge in sales from new channels such as the distributor and direct-selling model from Rmb25m in FY21 to Rmb179m. E-commerce, which accounted for 42.2% of FY22 sales (FY21: 36.5%), recorded a 23.5% YoY increase last year to Rmb726m. GPM was down by 6.8ppt YoY to 63.9% as i) changes in channel mix with an increase in revenue from lower margin e-commerce and distributor model sales while revenue from higher margin offline counter sales declined; ii) transport expense has been reclassified to COGS since 2022, which impacted by 3.2ppt. S&D cost ratio was down by 7.5ppt YoY to 51.8% due to i) reclassification of the aforementioned transport expense; ii) reduction in concessionary counters and thus less salesperson and commission expenses, and iii) more A&P carried out with online channels. Admin cost ratio also lowered by 0.5ppt YoY to 4.6% as certain salary expenses that used to book under admin cost was now recorded under S&D. As a result, NP was up by 34.6% YoY to Rmb116m in FY22, 4% higher than our original estimates of Rmb112m. No final dividends were recommended for FY22 (FY21: nil).

CROSBY Research – Natural Food International (1837 HK/BUY): Continue to build up its new channel business