\u3000\u3 Shengda Resources Co.Ltd(000603) 365 Shanghai Shuixing Home Textile Co.Ltd(603365) )
China's home textile industry is a leader with outstanding advantages in online operation. The company is the leader of Chinese home textile, and its products include kit, quilt core, pillow core, etc. It has a multi category brand matrix based on the coordinated development of "Mercury" (positioning medium and high-grade), "bliss" (biased towards the public), " Shanghai Shuixing Home Textile Co.Ltd(603365) wedding hall" (wedding), "Mercury baby" (baby) and "Mercury kids" (children). In its early years, the company focused on offline distribution + direct sales. Since 2008, the company has developed online and entered the e-commerce channel earlier in the industry. In 2010, the company established an e-commerce subsidiary alone. From 2014 to 2020, the compound growth rate of revenue was 9.3%, of which the compound growth rate of online / offline revenue was 27.1% / 1.6% respectively, and the proportion of online revenue increased from 20.7% to 49.9%. In 2020, under the impact of the epidemic, the revenue achieved positive growth (YoY + 1.09%), of which the online / offline revenue was + 24.0% / - 13.9% year-on-year, the revenue proportion was 49.9% / 50.1% year-on-year, and + 9pct / - 9pct year-on-year respectively.
The performance of 2021q1-q3 is good, and the online has maintained rapid growth. 1) On the whole, the revenue & profit of 2021q1-q3 increased by more than double digits compared with that before the epidemic: revenue yoy + 28.2% / increased by 21.7% compared with the same period in 2019, and net profit attributable to parent yoy + 44.4% / increased by 16.5% compared with the same period in 2019. 2) Quarter by quarter, Q1 / Q2 grew faster and Q3 slowed down: the revenue of Q1 / Q2 / Q3 in 2021 was + 49.1% / 31.5% / 11.8% year-on-year respectively, and + 19.4% / 33.7% / 12.7% compared with the same period in 2019. 3) From the perspective of different channels, 2021h1 online maintained a high growth and offline showed a recovery trend: 2021h1 online / offline revenue increased by 46.27% and 32.19% respectively year-on-year. Due to the impact of repeated epidemic + flood, we expect a certain decline in offline revenue in 2021q3 and an improvement in Q4.
The proportion of online revenue is high, driving the growth of revenue and leading peers. 1) The growth rate of online revenue of head home textile brands is higher than that of offline as a whole. Due to the fixed size, stable quality and convenient online consumption of home textile products, the head brand has obvious online advantages and online growth is significantly faster than offline. Taking 2019 before the epidemic as an example, the year-on-year growth rates of Shanghai Shuixing Home Textile Co.Ltd(603365) , Hunan Mendale Hometextile Co.Ltd(002397) online / offline revenue were 19.2% / 5.1% and 117.1% / 4.0% respectively. 2) The proportion of mercury online revenue is higher than that of its peers. From 2019 to 2020, the average proportion of Shanghai Shuixing Home Textile Co.Ltd(603365) , Luolai Lifestyle Technology Co.Ltd(002293) , Hunan Mendale Hometextile Co.Ltd(002397) online revenue is 43% / 26% / 17.2% respectively. 2021 "double 11" mercury tmall ranks first in the ranking of home department stores. 3) Mercury's revenue growth is higher than that of its peers. Thanks to the high online proportion, the compound growth rate of revenue in Shanghai Shuixing Home Textile Co.Ltd(603365) 2018-2020 was 7.26%, higher than that of peers Luolai Lifestyle Technology Co.Ltd(002293) (1.71%) and Hunan Mendale Hometextile Co.Ltd(002397) (4.75%). This trend continued in the first three quarters of 2021, and the revenue of mercury / Luolai / Mengjie increased by 28.2% / 23.0% / 12.9% year-on-year respectively.
Focus on the "three horizontal and one vertical" strategy, build large single core products and improve product competitiveness. The company has established the "three horizontal and one vertical" strategy, that is, focusing on the core category vertically, establishing a three-dimensional brand structure horizontally, broadening the age group of consumers and expanding the category of soft clothing textiles. The quilt core category has few styles, outstanding quality characteristics and is easy to create extreme pieces. In 2020, the company successfully launched quilt core products such as gold partner (upgraded), ultra filament, Hungarian goose down and German down series. In 2020, the revenue of kit, quilt and pillow core products was - 2.3% / + 8.5% / - 3.6% year-on-year respectively. The breakthrough of the core category will help to improve the efficiency of the supply chain and reduce production costs. It is expected to radiate and drive the coordinated development of other categories in the future.
Profit forecast and investment rating: in the short term, the company is the leader of China's home textile industry. The e-commerce operation has the first mover advantage and excellent operation and management ability, and its performance is expected to remain relatively stable in the uncertain environment of the epidemic. In the long run, with consumers' pursuit of improving the quality of life, home textile products are expected to usher in the trend of accelerated change and category upgrading, and the company is expected to benefit from the improvement of industry concentration. We expect that the net profit attributable to the parent company from 2021 to 2023 will be + 33.3% / + 14.2% / + 13.3% year-on-year respectively, and the corresponding PE will be 12.2x/10.7x/9.4x respectively. The "buy" rating will be given for the first time.
Risk tip: the epidemic repeatedly affects residents' consumption and increases inventory pressure.
