Bear Electric Appliance Co.Ltd(002959) (002959)
Event: the company announced that in order to meet the needs of the company’s development, optimize the company’s management and improve operation efficiency, the company adjusted the organizational structure, removed the original pot business unit and electric appliance business unit, and added baby products business unit and parts business unit; At the same time, the original operation management center will be removed and a new digital center and administrative service center will be established.
Core view
Since the fourth quarter, the company’s revenue has warmed up month on month, expanding from small kitchen appliances to infants and children and personal care, creating a new growth point. Under the epidemic situation in 2020, the demand release rhythm of small household appliances accelerated, resulting in the problem of high base for the company’s revenue growth in 2021. Referring to the online sales statistics of magic mirror data (including tmall Taobao, jd.com, Suning, Gome online and other channels), since February 2021, the sales of Xiaoxiong brand kitchens and small household appliances have shown a negative growth trend year-on-year, but the decline has gradually narrowed since the third quarter, and the sales have become positive year-on-year and increased slightly by about 1% in November 2021, We believe that on the one hand, the pressure from the high base is gradually alleviated, on the other hand, the company pays close attention to the needs of users, continuously carries out product iteration and innovation, and gradually expands categories such as mother and baby, personal care and household products, so as to promote the recovery of income growth in the fourth quarter. This organizational structure adjustment reflects the strategic importance of the company to infant and child care, personal care and other categories. In the future, category expansion is expected to continue to create a new growth point of the company’s revenue.
The pressure of rising prices of raw materials on the cost side has been gradually digested, and the profitability can be repaired steadily. The price rise of raw materials and other factors have led to pressure on the cost side of the company since 2021. It is difficult to predict the specific improvement time point in the short term, but there is great possibility and space for further easing in the future. Considering that the company has gradually raised the average price through the upgrading of product structure since 2021, the price increase and landing process will be gradually reflected, and the company’s gross profit margin is expected to be repaired steadily.
As a leading enterprise of creative small household appliances rooted in the Internet, the company is expected to rely on its R & D and innovation strength to achieve continuous category expansion in the future, and open up growth space through diversified channel operation. On the product side, the company will continue to grasp the advantages of the long tail category, realize the continuous expansion of the category and open the space for revenue growth through the development of emerging categories and the deepening of demand segmentation of mature categories; On the channel side, relying on profound e-commerce channel operation experience, diversified channels are steadily advancing from mainstream e-commerce to new media social e-commerce, from online to offline; On the brand side, it accurately reaches the young group through multi-channel marketing and deepens the brand image of “cute household appliances”.
Financial forecast and investment suggestions
Considering that weak demand in 2021 will drag down revenue growth and the pressure of rising prices of raw materials at the cost side, combined with the actual situation in the first three quarters, it is predicted that the net profit attributable to the parent company from 2021 to 2023 will be RMB 313 / 404 / 505 million respectively (previously predicted to be RMB 563 / 688 million from 2021 to 2022). Give the company a valuation of 26 times P / E ratio in 2022 (appropriately reduce the premium rate to 20% in combination with the company’s profit growth in 2023 and the average value of comparable companies), corresponding to the target price of 67.08 yuan, and maintain the “overweight” rating.
Risk statement
The risk that the insufficient R & D and innovation capability leads to the failure of category expansion progress to meet expectations and the decline of valuation; The risk of intensified industry competition; Risk of sharp rise in raw material costs
