Vipshop: Small and Beautiful, Better than Big and "Declining"?

On May 23, before the US stock market opened, Vipshop released its Q1 2023 report, with the following highlights:

1、Comprehensive recovery of all operation indicators: The company's GMV increased by 14% this quarter, reaching 48.5 billion, significantly better than the expected 43.3 billion. In terms of ASP and orders, the number of orders increased by 11% this quarter, and ASP increased by 3%. It is a healthy structure with quantity as the main driver and price as the auxiliary.

At the same time, the number of active users of the company also returned to growth this quarter, increasing by 1.6 million year-on-year. It is the first time to return to growth after 5 consecutive declines, and the single user's order frequency and order amount have also been comprehensively restored.

2、Revenue and gross profit continue to improve: Due to the recovery of GMV growth, the company achieved revenue of 27.5 billion this quarter, a year-on-year increase of about 8%, exceeding the market's expected 26.1 billion. The revenue growth rate is still lower than that of GMV. Dolphin Analyst believes that the reason may still be delivery delay. Meantime, the growth rate of the company's 3P business has reached 21%, leading to an increase in weigh and the gap between GMV and rev. growth.

At the same time, under the circumstances of the increase in the proportion of 3P revenue and the possible reduction of subsidies, the trend of gross profit margin improvement is also continuing. This quarter, it increased by 1.6pct year-on-year to 21.4%, and finally achieved a gross profit of 5.9 billion, higher than the market's expected 5.4 billion.

3、Revenue recovery, but costs continue to fall: Although the company's operating and revenue indicators have been significantly restored this quarter, the company's cost is still frugal. The cost rates of fulfillment, G&A, and R&D have all decreased by 0.1~0.4pct compared to the previous year. Only the marketing expenses remained the same year-on-year, indicating that the company was not too conservative in marketing and promotion.

Finally, the company's operating profit margin this quarter still maintained a high level of 7.2%, and only decreased by 0.5pct compared to the fourth quarter of last year. It achieved an operating profit of about 1.99 billion, significantly exceeding the market's expected 1.47 billion. After deducting non-operating expenses such as taxes and interest, Vipshop's net profit this quarter also reached 1.9 billion yuan.

4、Looking forward to the second quarter of this year, the company expects revenue to increase by 10%-15% year-on-year, and the growth rate will continue to accelerate compared to this quarter.

Dolphin Analyst's view:

Overall, Vipshop's performance this quarter also showed a trend of comprehensive recovery. In terms of operation metrics, the number of users and GMV have returned to growth, and in terms of financial indicators, revenue and gross profit margin have also continued to improve, while cost inputs have remained restrained. In the end, the company exceeded market expectations in terms of scale, revenue, and profit indicators.

Compared with industry leaders such as JD.com and Alibaba, Vipshop, which is in a corner, has handed in a performance that is stronger than the industry. While the company may no longer compete for market shares, the company also seems to be less affected by the intensifying competition.

From the perspective of valuation, the company's current total market value is less than RMB 60 billion, while its net cash on hand is about RMB 19 billion. Even if we take a conservative view, a net profit of 6-8 billion for the whole year is not difficult for the company. That means the company is currently trading at a PE valuation of only 5-7x after deducting cash. Thus the valuation still reflects a relatively conservative expectation.

At the same time, from the perspective of return, the company with a market cap of only USD 8 billion has sincerely set forward a USD 1 billion share repurchase plan. That action is full of sincerity.

The following is a detailed financial report:

1. Comprehensive repair of operating data

In the first quarter, under the background of the recovery of consumption in China after the epidemic, Vipshop achieved a GMV of RMB 48.5 billion, a year-on-year increase of 14%, reversing the trend of continuous shrinkage in scale for the previous five quarters and finally returning to growth.

Moreover, compared with the overall growth of about 7%-8% in online physical retail, and the performance of JD, Alibaba, or zero growth or negative growth, the company that suffered more damage last year has stronger resilience in its recovery this year.

In terms of price-volume split, in the first quarter, the company's order volume and customer unit price both returned to year-on-year growth. Among them, the order volume increased by 11% year-on-year, and the customer unit price increased by 3%. Volume-driven with price as a supplement, the structure is also very healthy.

At the same time, Vipshop's quarterly active users also returned to positive growth, with an increase of about 160 million people year-on-year, and the average shopping amount per active user in a single quarter also increased by 10% to RMB 1,107, indicating that consumers' willingness to shop has begun to recover.

Overall, whether it is from the number of users, order volume, customer unit price, or the final GMV indicator, Vipshop has achieved comprehensive repair this quarter.

2. Continuous improvement in revenue and gross profit

Due to the recovery of GMV growth, the company achieved a total revenue of RMB 25.9 billion this quarter, a year-on-year increase of 9%, significantly exceeding the market's expected 26.1 billion. There is still a gap between revenue and GMV growth, and Dolphin Analyst believes that the reason is still logistics obstruction and the growth rate of 3P business is higher than that of 1P, and the proportion is increasing. Due to the increase in the proportion of high-gross-margin 3P business (as well as the reduction of subsidies), Vipshop's gross profit margin for this season still increased by about 1.6pct year-on-year, but the rate of increase was lower than the 2pct acceleration in the fourth quarter of last year. The company ultimately achieved a gross profit of 5.9 billion yuan, a year-on-year increase of nearly 18%, which exceeded the expected 5.4 billion.

Looking forward to the quarter of 2023, the company expects revenue to increase by 12% year-on-year to 27.6 billion, which is higher than the expected 26.9 billion.

Third, expenses are still restrained, and profits continue to improve.

While the company's revenue is recovering, its expense ratio is still trending downward. From a year-on-year perspective, the fulfillment, management, and R&D expense ratios have decreased by 0.1~0.4pct, and only the marketing expense ratio has remained flat at 3%, indicating that the company has not been too frugal in marketing investment.

Overall, the company continued the trend of gross profit repair and continued expense savings in the previous quarter, and the operating profit margin for this quarter remained at a high level of 7.2%. As the low point of the profit margin in the off-season of the first quarter, it only decreased by 0.5pct compared to the fourth quarter of last year.

The company ultimately achieved an operating profit of about 1.99 billion yuan, significantly exceeding the market's expected 1.47 billion. Excluding non-operating expenses such as taxes and interest, Vipshop's net profit for this season also reached 1.9 billion yuan.

Dolphin Analyst's previous research:

February 24, 2023 telephone conference call "Vipshop: Not Participating in the Internal Struggle, Doing Small and Beautiful Well"

February 23, 2023 financial report review ""Turning Over a New Leaf"? Will Vipshop's Spring Come?"

2022 November 22 Telephone Conference "Vipshop: Less Subsidies, Less Investment, Let's See User Growth Next Year (Conference Summary)"

2022 November 22 Financial Report Review "After All the Turmoil, Can Vipshop Only Be a "Cigarette Butt Stock"? (Longbridge Analyst Review)"

2022 August 19 Telephone Conference "Increase Investment, Strive for 3Q User Growth, 4Q Revenue Growth (Vipshop Telephone Conference Summary)"

2022 August 19 Financial Report Review "Give Up! Vipshop's Countercyclical Story Has No Substance (Longbridge Analyst Review)"

2022 May 19 Telephone Conference "Can Breaking Through Non-Apparel Categories Save Vipshop? (Conference Summary)"

2022 May 19 Financial Report Review "The Performance Continues to Decline, and Vipshop's Dawn is Hard to Find (Longbridge Analyst Review)"

2022 February 23 Financial Report Review "With Performance "Deep Diving," Is There No Room for Vipshop's Survival Under the Internal Competition of Giants? (Longbridge Analyst Review)"

2021 November 18 Financial Report Review "What's the Latest Situation with Vipshop? Ten Charts Explain Everything (Longbridge Analyst Review)"

Risk Disclosure and Statement for this article: Dolphin Analyst Disclaimer and General Disclosure.