Zhejiang Natural Outdoor Goods Inc(605080) (605080)
Zhejiang Natural Outdoor Goods Inc(605080) is a leading manufacturer of outdoor products, recognized by many professional outdoor retailers. Founded in 1992, the company focuses on the R & D and design of outdoor products, starting from PVC mattresses and gradually expanding to the production of TPU products, including mattresses, outdoor bags and other products. The company also established a wholly-owned subsidiary Ruihui textile, focusing on the development of composite fabrics. Since then, the company has gradually mastered the key process technology of inflatable mattress and built a vertical integration system. Most of the company’s downstream customers are professional sports retailers. After 2010, the company successfully established cooperation with decathlon, seatosubmit, REI and other international well-known brand retailers.
Inflatable mattress is the company’s main product, and the increase in the proportion of TPU promotes the overall gross profit margin. Inflatable mattress is the core product of the company, accounting for more than 70% in 2020, of which the proportion of TPU mattress is increasing year by year. The company’s inflatable mattress category has advanced technology and high gross profit margin. With the increase of the proportion of TPU, the gross profit margin rises steadily, reaching 44.69% in 2020. Under the technology support, from 2018 to 2020, the company’s overall gross profit margin was 35.06%, 39.83% and 40.68% respectively, maintaining a high level and rising.
The company’s competitive barriers: TPU composite fabric and hot fusion technology are the core technologies, which are recognized by professional outdoor retailers based on technology. The company has been deeply engaged in inflatable outdoor products for nearly 30 years. At present, it has mastered all core production processes and achieved technology leadership in the industry. For example, Zhejiang Natural Outdoor Goods Inc(605080) is the only supplier with hot fusion technology among the 45 global strategic partners of decathlon, the world’s largest outdoor products retailer. Outdoor products have high functions such as waterproof, windproof and lightweight. The company’s strong product strength can more effectively meet the needs of downstream customers, and is expected to increase its share. The company’s main customers are professional outdoor products retailers, and the supplier’s access threshold is high, forming a certain endorsement role. At present, the company’s largest customer is decathlon. The two sides have officially signed a strategic partnership agreement, which reflects decathlon’s recognition of the company’s product strength; At the same time, the company is the inflatable mattress supplier of Rei, the largest outdoor products retailer in the United States.
The company’s development space: the market share and product upgrading in Europe and America, the participation rate of camping in China, and the expansion to products other than inflatable mattresses. The company takes Europe and America as the main market, with revenue accounting for more than 60%. The European and American market is relatively mature and has large space. Among them, the participation rate of camping in the United States has remained above 13% for many years, and the market scale of camping equipment is US $31.271 billion. As for outdoor mattresses, we calculate as follows: according to the camping participation rate in the United States, the number of camping participants in the United States is about 45 million. The durability of inflatable mattresses is estimated to be replaced once every 2-3 years, so the annual demand is 15-20 million outdoor mattresses. The total annual demand in Europe and the United States is about 40 million, Zhejiang Natural Outdoor Goods Inc(605080) accounts for less than 7% in the main markets. With the leading technical advantages, the company still has great room for improvement. In China, China’s camping participation rate is very low. According to the estimation of American camping participation rate in 2020, China has 181 million potential camping people, and the camping equipment market has great potential. In terms of category expansion, in the sales amount of decathlon, outdoor luggage, headrest cushion and other categories account for 22.55%, 10.55% and 19.59%, that is, non mattress products of decathlon account for 52%, which reflects the company’s ability to expand from inflatable mattress to other categories. At present, the sales to other customers are still mainly inflatable mattresses, and the proportion of other categories is expected to increase in the future.
Profit forecast and investment suggestions: the next 2-3 years will be three years for the release of production capacity of raised investment projects, and the revenue is expected to maintain rapid growth. We speculate that the company’s revenue is expected to exceed 1.8 billion yuan after all raised investment projects are completed. It is estimated that the company will realize operating revenue of RMB 841 million, RMB 1167 million and RMB 1509 million from 2021 to 2023. Under the optimization of the company’s technical advantages and product structure, the overall net profit level of the company will be stabilized at a high position. Finally, the net profit in the next three years is expected to be RMB 223 million, RMB 310 million and RMB 396 million respectively. The PE level corresponding to the company’s current net profit forecast is 32.88, 23.65 and 18.53 times, and peg is less than 1. For the first coverage of the company, give a “recommended” rating.
Risk tip: the progress of the company’s raised investment projects is lower than expected, the price of raw materials fluctuates sharply, and the epidemic affects the terminal demand.
