\u3000\u3 China Vanke Co.Ltd(000002) 397 Hunan Mendale Hometextile Co.Ltd(002397) )
The performance of China's leading home textile industry remains to be recovered. Originated from Changsha quilt factory founded in 1956, it owns Mengjie, Mei (founded in 2003), Mengjie baby (2006), Mengjie home (2010), online brand search (2010), Seven Star washing and care (2017) and other brands. It is mainly engaged in high-quality bedding + high-end washing and care services. It ranks first in the sales volume of China's high-end bedding market for 12 consecutive years (20092020). In 2020, the revenue was 2.22 billion yuan / year-on-year - 14.73%, and the net profit attributable to the parent company was 44.92 million yuan / year-on-year - 47.39%. The performance of the first three quarters of 2021 has rebounded, but it has not yet returned to the level before the epidemic. The revenue is + 12.8% / 9.3% compared with the same period in 2019, and the net profit attributable to the parent is + 8.8% / 72.0% compared with the same period in 2019 (the profit recovery degree caused by the increase of expenses is lower than the revenue). As of 2021h1, there were 1878 stores (483 Direct stores + 1395 franchisees).
The channel sinking was blocked, and the stores were closed, and the online channel maintained double-digit growth. In 2019, we started the reform of smart retail, promoted smart stores to sink into third and fourth tier cities and key communities, and opened 949 new smart stores throughout the year; In 2020, the epidemic broke out, the anti risk ability of smart stores was low, and the channel sinking strategy was blocked. The company readjusted the channel strategy, closed stores net for two consecutive years in 2020 and 2021, and the offline sales were greatly affected. 1) By channel, online channels maintained double-digit growth. In 2020, the online / direct / franchise revenue was + 10.4% / - 18.2% / - 20.0% year-on-year, accounting for 19.4% / 39.0% / 41.5% respectively, and the number of direct / franchise stores decreased by 12% / 13% respectively compared with 2019; 2021h1 online / direct / franchise revenue was + 14.2% / + 4.6% / + 25.9% year-on-year, accounting for 18.8% / 38.6% / 42.7% respectively, and the number of direct / franchise stores decreased by 2% / 11% respectively compared with the end of 2020. 2) By product, the whole category needs to be further recovered. 2021h1 Kit / quilt core / pillow core / other revenue was + 29.3% / + 18.2% / + 47.5% / - 9.6% year-on-year, respectively, compared with - 11.2% / - 14.8% / - 9.7% / - 8.8% in 2019h1, accounting for 39.0% / 29.1% / 6.6% / 25.2% of revenue respectively.
Focus on high-end development strategy and build the first brand of high-end bedding products. At the beginning of 2021, the company cooperated with Shanghai Junzhi, a well-known consulting organization in China, to strategically reshape Mengjie brand from the four dimensions of product, channel, operation and communication. A high-end strategy conference was held in May 2021. 1) Products: China's first bedding enterprise with 7a raw materials and high-end certification, highlighting product quality; Vincent, the former LV design director, was appointed as the creative director of the global bedding research center to highlight the high-end design. 2) Channel: release a new terminal image and create a comprehensive experience place integrating brand image, high-end products and washing and care services. 2021h1 company actively adjusted its channels to adapt to the high-end strategy, and the number of direct / franchise stores decreased by 9 / 178 respectively compared with the end of 2020. 3) Operation: focus on creating the "retail + service" mode, and launch luxury grade washing and care services for members according to the pain points of "difficult to wash and dry" of high-end bedding. 4) Communication: in August 2021, Xiao Zhan, the top traffic star, was signed as the brand spokesperson, and Mengjie's online sales exceeded 60 million on the official announcement day.
When the fixed increase plan is terminated, equity incentive helps to mobilize the enthusiasm of the management. In February 2021, the company disclosed the fixed increase plan and planned to raise 500 million yuan for three projects: brand upgrading channel construction, high-end washing and care center construction and silk raw material base construction. In February 2022, the company decided to terminate the fixed increase. The fifth restricted stock incentive plan was launched in April 2021. The incentive objects include senior executives and core managers such as Tu Yunhua (director and deputy general manager), Huang Huihua (General Manager) and Cheng Yan (Deputy General Manager). The exercise conditions of the two exercise periods are: the cumulative net profit in 2021 and 2022 and the net profit in 2023 are not less than 100 million yuan and 200 million yuan respectively.
Profit forecast and investment rating: the company is the leader of China's home textile industry. After the outbreak of the epidemic, it has undergone major strategic adjustment, and its performance has not fully recovered. Since 2021, it has actively sought strategic changes and established the strategy of focusing on high-end brands. The market with relatively small card competition ("Mengjie" brand price band 4993999 yuan, "Mei" brand price band 199949999 yuan, higher than the peer Luolai brand 8 Jinzai Food Group Co.Ltd(003000) yuan). We believe that the high-end brand strategy is conducive to the company to give full play to its advantages and strengthen its competitiveness. It is expected that the net profit attributable to the parent company will be 11.3% / 20.0% / 20.7% year-on-year from 2021 to 2023, and the corresponding PE will be 55x / 45x / 38x respectively. It will be given a "neutral" rating for the first time.
Risk tip: the epidemic repeatedly affects residents' consumption, the marketing effect is less than expected, and shareholders reduce their holdings.
