Shenzhen Breo Technology Co.Ltd(688793) (688793)
The company is a leading enterprise of small intelligent massage appliances in China. The company focuses on the R & D, production, sales and service of Intelligent Portable Massager. At present, it has formed a product system with four categories of eyes, neck, head and scalp as the main body, and the rest of the human body prone to fatigue and other intelligent health products as the auxiliary. The newly released moxibustion maintenance series belongs to the hardware with consumables operation mode. The company reduces the cost of acquiring customers and improves customer stickiness through the re purchase of consumables. It is expected that it will continue to contribute stable income to the company in the future.
China’s massage appliance market has low penetration rate and broad development space. The global market scale of massage appliances shows a stable development trend, and the growth rate remains at about 10%. In 2019, the global market scale of massage appliances exceeded US $15 billion for the first time. According to our calculation, the massage appliance market is expected to reach US $17.8 billion in 2021, with a year-on-year increase of 11%. China has become one of the fastest growing regions in the global massage appliance market. At present, the penetration rate of massage appliances in China is less than 2%, while the penetration rate in mature markets such as Japan and South Korea is close to 20%, with about 10 times the penetration rate.
The company has clear user positioning and obvious brand awareness. With the continuous emergence of scientific and technological concepts such as personal health cloud management, health data analysis and artificial intelligence interaction, the intellectualization of the company’s products continues to upgrade and the innovation cycle continues to shorten. The company maintains about 8 new products every year, focusing on the iteration of existing products and taking into account the development of new products. The company’s product positioning is medium and high-end, and takes the new product + innovative pricing method as the pricing strategy. The customer unit price of the product is much higher than the market average, and the gross profit margin of the main products is more than 50%. The company has adopted diversified marketing means, increased promotion efforts in channels and terminal promotion activities, and carried out effective brand communication and concept publicity through contracted spokesmen, which further improved the popularity of the company’s brand and significantly increased young consumer users.
Profit forecast and investment rating
We predict that the operating revenue of the company from 2021 to 2023 will be RMB 1.215/17.25/2.346 billion respectively, and the net profit attributable to the parent company will be RMB 120/192/281 million respectively. The current stock price corresponds to 46 / 28.8/19.6 times PE. Considering the large development space of the industry in the future and the company’s market position in portable and movable massagers, the “overweight” rating is given for the first time.
Risk tip: insufficient consumer demand, slow product renewal, slow development of offline stores, and sharp fluctuations in raw materials.
