Qumei Home Furnishings Group Co.Ltd(603818) (603818)
Event overview
Qumei Home Furnishings Group Co.Ltd(603818) issued an announcement to sign the investment letter of Qumei Home Furnishings Group Co.Ltd(603818) strategic cooperation with hilling investment and Yinti consulting respectively on the equity financing of qumeirunto, a wholly-owned subsidiary. Hilling investment and Yinti consulting plan to invest RMB 200 million and US $25 million respectively by increasing capital or acquiring old shares from qumeirunto. Hillhouse investment and Yinti consulting, introduced as strategic investors, are expected to provide long-term empowerment to Qumei, form brand endorsement and further enhance the competitiveness of the company. Analysis and judgment:
Strategic investors such as Hillhouse investment are introduced to empower Ekornes for a long time.
The company plans to introduce Hillhouse investment and Yinti consulting as strategic investors, among which, Hillhouse investment and Yinti consulting plan to report to qumeirunto, a wholly-owned subsidiary (the company is a special purpose company established when acquiring ekornesas) invest RMB 200 million and US $25 million respectively to support the future development of the company by increasing capital or transferring old shares. The valuation of this transaction corresponds to the valuation of ekornesas of RMB 6.045 billion, compared with the valuation of the company's acquisition of the remaining 9.5% equity of ekornesas in July 2021 (the valuation of ekornesas is RMB 5.768 billion), and the premium rate is 4.80%, which also shows that Hillhouse investment and Yinti consulting recognize the quality of overseas Ekornes. In addition, Hillhouse investment has multiple industry investment and management backgrounds, rich resources and industry experience, and obvious industry advantages. After the subsequent formal investment, Hillhouse investment and Yinti consulting have the right to be a director in qumeirunto The board of directors will appoint one director each to empower Ekornes for a long time in the future development, accelerate the development of Ekornes's Chinese market and the layout of relevant industrial sectors, and further enhance the company's comprehensive strength.
Ekornes' reform has been effective and has sufficient growth momentum.
Since 2019, the company has carried out a series of reforms in management, channels and products of China Qumei and overseas Ekornes companies, and the reforms have continued to bear fruit. In the short term, ekorens's current performance is the best in history, and stressless's inventory order reserve has exceeded 2 months. New orders have a good growth momentum and full orders are in hand. In addition, all factories in Southeast Asia have resumed production since late September, and the production capacity has basically returned to normal. It is expected that the impact of the epidemic on the company will gradually reduce, and with the decline of raw material prices, the overall profit of the company is expected to improve. In the medium and long term, overseas Ekornes will shine new opportunities by expanding categories, channels and markets. It is expected that with the accelerated development of the Chinese market, it is expected to maintain a rapid growth momentum in the next three years.
The financial cost is expected to be continuously optimized and the profit may be released quickly.
In 2018, the company acquired Ekornes in cash, resulting in a large amount of interest bearing liabilities, and the financial expenses rose sharply. The maximum financial expenses in a single quarter was 107 million yuan in 2020q2. The large financial expenses put pressure on the profit side. Since 2019, the scale of interest bearing liabilities has been effectively reduced through private placement, the introduction of strategic investors and operational net cash flow repayment, and the financial cost has been greatly reduced by replacing high-cost liabilities with low-cost liabilities. This time, Hillhouse investment and Yinti consulting are introduced. After subsequent formal investment, it is expected to further reduce the company's interest bearing liabilities, With the accelerated development of overseas Ekornes and the continuous upward operation of China Qumei, the operating performance is released one after another, and the financial cost pressure is expected to continue to ease, accelerating the release of the company's profits.
Investment suggestions:
Qumei is undergoing positive changes and its performance is gradually released. The introduction of Hillhouse investment and Yinti consulting as strategic investors is expected to accelerate the development of overseas Ekornes in the Chinese market and other cooperation, and help the rapid development of the company. Maintaining the previous profit forecast, it is estimated that the company's operating revenue in 21-23 years will be 5.303/63.78/7.463 billion yuan and EPS will be 0.53/0.85/1.20 yuan respectively. According to the closing price of 14.10 yuan / share on December 29, 2021, the corresponding PE will be 27 times, 17 times and 12 times respectively. Considering the accelerated release of the company's performance, the "buy" rating will be maintained.
Risk statement
Risk of continuous rise in raw material prices; Risk of continued maritime tension; The risk of property sales falling short of expectations; Industry competition intensifies risks.
