In order to better reflect the company’s business and strategic layout, Shanghai M&G Stationery Inc(603899) ( Shanghai M&G Stationery Inc(603899) , SH; yesterday’s closing price of 51.00 yuan) is ready to “change its name”.
On March 14, Shanghai M&G Stationery Inc(603899) announced that the company held the 11th meeting of the 5th board of directors, deliberated and approved the proposal on changing the company’s securities abbreviation, and agreed to change the securities abbreviation from ” Shanghai M&G Stationery Inc(603899) ” to “Chenguang shares”. As for the reasons for renaming, Shanghai M&G Stationery Inc(603899) said that after renaming, it can more comprehensively and accurately reflect the business situation of the company, better reflect the business and strategic layout of the company, and further strengthen the corporate image and brand value.
The daily economic news noted that Shanghai M&G Stationery Inc(603899) recently disclosed the 2021 annual performance express. Data show that last year, the company’s operating revenue was about 17.607 billion yuan, a year-on-year increase of 34.02%; The net profit attributable to shareholders of listed companies was about 1.518 billion yuan, a year-on-year increase of 20.91%. The net profit achieved double-digit growth, and the financial data were still bright, but the company’s share price fell endlessly in the secondary market. As of March 16, Shanghai M&G Stationery Inc(603899) closed at 51.00/share, down more than 50% from the high of 100 yuan in February 2021.
market value has exceeded 100 billion
Since its listing in 2015, Shanghai M&G Stationery Inc(603899) performance has been rising all the way, and the stock price has also continued to rise. In February 2021, the stock price exceeded 100 yuan at its peak, and the market value exceeded 100 billion, which is known as “stationery Mao”.
According to the Shanghai M&G Stationery Inc(603899) financial report, the company’s revenue is divided into traditional core business and new business. The traditional core business is the design, R & D, manufacturing and sales of Chenguang and its brand writing tools, student stationery, office stationery and other products, as well as the Internet and e-commerce platform Chenguang technology. The new business is the retail store business, Jiumu sundry agency, Chenguang living hall and office direct sales business, Chenguang kelipu.
According to Shanghai M&G Stationery Inc(603899) announcement, at the beginning of listing in 2015, the company’s operating revenue mainly came from traditional core business, which accounted for more than 90% of the total operating revenue. As for the reasons for the change of name, Shanghai M&G Stationery Inc(603899) in the announcement, it is stated in more detail that in recent years, the company’s new business has developed rapidly, and the revenue from new business (office direct sales business and retail store business) accounts for more than 40% of the total operating revenue year by year. In 2020, the revenue from new business accounts for more than 40% of the total operating revenue.
This seems to indicate that with the increasing proportion of new businesses, Shanghai M&G Stationery Inc(603899) doesn’t want to be just a “stationery selling” company in the inherent impression of the outside world.
In this regard, Zhou Wenke, manager of the production and Research Department of Wuchan Zhongda Group Co.Ltd(600704) Outai Co., Ltd., told the reporter of the daily economic news that the general name change reflects the changes of the enterprise’s target customers, target markets, enterprise strategy and positioning. Shen Meng, executive director of Xiangsong capital, believes that the first reason for Shanghai M&G Stationery Inc(603899) renaming is to dilute the established impression of “stationery” on investors; Second, new cross-border businesses may be developed, so the word “shares” is replaced by a more neutral one.
company’s traditional business grew steadily
On March 8, Shanghai M&G Stationery Inc(603899) released the annual performance express of 2021, which showed that the company’s revenue and net profit both achieved double-digit growth.
In this regard, The Pacific Securities Co.Ltd(601099) securities issued a research report that Shanghai M&G Stationery Inc(603899) traditional business grew steadily and is optimistic about the continuous volume of the company’s new business Citic Securities Company Limited(600030) research report said: “the revenue growth rate of traditional business (excluding Chenguang Technology) is expected to be about 15% in 2021. The dark time has passed and entered the improvement channel.”
For last year’s annual performance, Shanghai M&G Stationery Inc(603899) also further explained in the record of investor relations activities disclosed on March 15 that in terms of traditional core business, from the perspective of products, the category growth performance of integrated product development is significantly better than the average level. In the past three years, new product development has achieved remarkable results in reduction and quality improvement. With the number of new SKUs reduced by nearly half, it continues to maintain the growth level, and the contribution of new products has increased significantly.
In fact, last year, Shanghai M&G Stationery Inc(603899) once faced the pressure of lower than expected revenue growth and profit margin of traditional business, repeated epidemic in some regions and the impact of double reduction policy. In the third quarter of 2021, Shanghai M&G Stationery Inc(603899) revenue was RMB 4.465 billion, with a year-on-year increase of 18.24%, but the net profit after deduction was RMB 379 million, with a year-on-year decrease of 6.53%. In addition, Shanghai M&G Stationery Inc(603899) 2021 in the third quarter, the growth of traditional business in a single quarter also almost stagnated.
The research report shows that after excluding Chenguang technology, Shanghai M&G Stationery Inc(603899) 2021 the revenue of traditional business in the first three quarters of 2021 was 6.05 billion yuan, an increase of 23%; In the third quarter, the revenue in a single quarter was 2.2 billion yuan, an increase of 1% Southwest Securities Co.Ltd(600369) believes that the slowdown is mainly due to the high base in the same period and the double reduction policy. At that time, market views mostly pointed to the pressure on performance or the impact of the double reduction policy.
In this regard, Shanghai M&G Stationery Inc(603899) also further explained in the “record form of investor relations activities” newly disclosed on March 15, 2022: “the year-on-year change of the company since the third quarter of last year is the result of the superposition of the base number, double reduction and epidemic situation in the same period, which is difficult to judge quantitatively alone. How much the double reduction affects and how much the epidemic situation affects.”
In the context of repeated outbreaks and the impact of the double reduction policy, Shanghai M&G Stationery Inc(603899) said: “the reason why we are confident to maintain the medium-term growth target of 10% ~ 15% of our traditional core business is that the trend of consumption upgrading in China is still established, and the company has strong competitive advantages in products, channels and teams.”
transform to brand retail service provider
Shanghai M&G Stationery Inc(603899) believes that the slowdown in the demand growth of China’s stationery industry is not a new problem. The double reduction affects the demand, which does not necessarily mean the reduction of the scale of the industry. Even under the continuous influence of years of quality education and paperless in developed countries, the scale of stationery industry has generally maintained growth.
As for the development of new business in 2021, Shanghai M&G Stationery Inc(603899) also further disclosed that it is expected that the company’s new business will continue to maintain rapid growth, and the proportion of new business revenue in total operating revenue in 2021 is expected to further increase.
In response to the question “under the continuous and repeated epidemic situation, the passenger flow recovery of the company’s new business Jiumu sundry agency and the opening of stores in 2022” Shanghai M&G Stationery Inc(603899) said that the situation was good in the first half of last year, and the epidemic situation was repeated and challenged in the second half of last year. After adjustment, Jiumu’s performance was significantly better than the change of passenger flow in shopping malls and business circles. It is planned to maintain more than 100 stores in 2022.
“The cultivation of Jiumu and kelipu needs more time, including the synergy of acquiring foreign brands, which is a long-term consideration. Chenguang’s main task is to strengthen the rapid response ability to terminals, improve the efficiency of supply chain, help terminals improve performance, cover cooperative terminals, develop medium and high-end categories, improve profitability, and lay a foundation for long-term transformation and efficiency.” Zhou Wenke told reporters.
Zhou Wenke believes that under the medium and long-term paperless office trend, the stationery industry is facing short-term and long-term pressure, which is difficult to avoid. The double reduction will affect the investment sentiment, but it has limited impact on the overall performance of Shanghai M&G Stationery Inc(603899) as can be seen from the 34% and 20.9% year-on-year growth in the business scale and profit of Shanghai M&G Stationery Inc(603899) 2021.
It is worth noting that for its own changes, Shanghai M&G Stationery Inc(603899) said that from the perspective of channels, the company is further transforming from wholesalers to brand retail service providers, enabling terminal shopkeepers to improve terminal commodity management ability.
In this regard, Zhou Wenke believes that the transformation of the b-end will affect the gross profit rate in the short term. In the long term, it is not necessarily a bad thing to use low gross profit to build a “moat” of the channel. Once the new business forms and new channels are successfully promoted, the brand effect of Chenguang will be strengthened, and the concentration of leading enterprises in the stationery industry will become more and more obvious.
