Chenguang Co., Ltd. ( Shanghai M&G Stationery Inc(603899) )
Event: the company issued the 2021 annual report. In 2021, the company achieved a revenue of 17.607 billion yuan, an increase of 34.02% at the same time; The net profit attributable to the parent company was 1.518 billion yuan, an increase of 26.55% at the same time; The non net profit deducted was 1.35 billion yuan, an increase of 22.38% at the same time. In a single quarter, Q1-Q4 company achieved revenue of RMB 38.12/38.74/44.65/5.446 billion respectively, with a year-on-year increase of 82.96% / 44.68% / 18.25% / 18.61% respectively; Q1-Q4 realized a net profit attributable to the parent company of RMB 328 / 3.38 / 4.51 / 401 million respectively, with a year-on-year increase of 42.5% / 44.34% / 0.57% / 16.92% respectively.
The business structure affects the apparent profit margin, with remarkable results in reducing costs and improving efficiency. 1) In terms of profitability, the company achieved a gross profit margin of 23.21% (- 2.15 PCT.) in 2021, The net interest rate attributable to the parent company is 8.62% (-0.93pct.), The gross profit margin of 21q4 in a single quarter is 21.11% (- 1.05pct.), The net interest rate attributable to the parent company is 7.34% (- 0.1pct.). The profit margin declined slightly, which was mainly due to the increase of Chenguang Keli puzhan ratio with relatively low gross profit margin. 2) In terms of period expenses, the sales expense rate in 2021 is 7.94% (-0.46 PCT.); The management fee rate is 5.30% (-0.36pct.), The R & D expense rate is 1.07% (-0.15pct.); The financial expense rate is 0.04% (-0.03pct.), Improve business efficiency under fine management.
According to the business model, the growth rate of new business is beautiful, and the traditional core business is growing steadily.
1) traditional core business: the revenue was 8.88 billion yuan, a year-on-year increase of 17%, and Q4 was repaired month on month. We estimate that the company’s traditional offline retail revenue in 2021 is 8.26 billion yuan (+ 18%), of which 21q4 revenue is 2.21 billion yuan (+ 5%). The company focuses on key terminals, alliance app empowerment, and promotes the quality improvement of single stores. Chenguang technology achieved a revenue of 527 million yuan (+ 11%), of which 21q4 revenue was 130 million yuan, basically the same year-on-year. The company continues to explore and optimize the method of creating explosive products, develop new e-commerce channels, and promote refined member management. The number of members of tmall official flag exceeds one million. Looking forward to 2022, the company will continue to promote the omni-channel layout and improve the retail service capacity. The core barriers of products, brands and channels are stable. We believe that the traditional core business is expected to repair to double-digit growth quarter by quarter.
2) new business: the revenue was 8.82 billion yuan, a year-on-year increase of 56%. Among them, the revenue of office direct sales business was 7.76 billion yuan (+ 55.3%), of which 21q4 revenue was 2.83 billion yuan (+ 32.5%). The company was shortlisted as a central enterprise customer such as national energy group and China General Technology Group, government procurement projects such as Jiangsu provincial government procurement online mall, financial customers such as Agricultural Bank Of China Limited(601288) , China Development Bank, MRO customers such as Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) group and China nuclear industry group. The company’s new and old customers have expanded MRO and new marketing categories, and the influence of office direct selling brand has been further improved. The business of large retail stores realized an operating revenue of 1.05 billion yuan (+ 60%), of which the revenue of 21q4 was 280 million yuan (+ 25%). By the end of the 21st century, the company had 523 large retail stores, including 60 Chenguang living halls, 463 Jiumu sundries clubs (319 directly operated and 144 franchised), and 27 new Jiumu sundries clubs were added compared with the end of the third quarter. The business channel of the company’s large retail stores expanded rapidly, the business quality improved steadily, the loss narrowed significantly, and it is optimistic that the performance will be large after the model runs through.
By product: product development, reduction and quality improvement, and continuous optimization of structure.
1) writing instruments: the revenue was 2.82 billion yuan (+ 23.7%), of which the volume / price increased by 17.7% / 5.1% respectively; The gross profit margin is 40.57% (-0.26pct.).
2) student stationery: the revenue was 3.13 billion yuan (+ 15.6%), of which the volume / price increased by 7.5% / 7.5% respectively; The gross profit margin is 33.10% (-0.33pct.).
3) office stationery: the revenue was 3.34 billion yuan (+ 18.3%), of which the volume / price increased by 18% / 0.3% respectively; The gross profit margin is 27.91% (-0.34pct.).
4) other stationery: the revenue was 550 million yuan (+ 69.8%), of which the volume / price increased by 67.8% / 1.2% respectively; The gross profit margin is 44.76% (+ 0.48pct.), The development of Jiumu sundry Club drives the rapid and large-scale development of other stationery.
5) office direct sales: the revenue was 7.77 billion yuan (+ 55.3%), of which the volume / price increased by 23.6% / 25.7% respectively; The gross profit margin is 9.37% (-1.61pct.).
Promote the strategy of one body and two wings, and be optimistic about the long-term growth of the company. The company’s traditional core business has developed steadily, with the continuous promotion of one body and two wings. With the continuous optimization of the company’s product structure and the continuous improvement of channel construction, the company has actively explored overseas markets, moved forward towards the vision of “world-class dawn”, and has abundant long-term growth momentum.
Investment suggestion: as the leader of stationery, Chenguang is optimistic about the long-term and steady development of the company, driven by traditional core business and new business. We expect the company to achieve operating revenue of RMB 21.64 billion, 26.27 billion and 23.52 billion from 2022 to 2024, with a year-on-year increase of 22.9%, 21.4% and 20.0%, and realize net profit attributable to the parent of RMB 1.836 billion, 2.190 billion and 2.578 billion (the previous predicted value from 2022 to 2023 was RMB 1.880 billion and 2.277 billion), with a year-on-year increase of 21.0%, 19.3% and 17.7%, Maintain the “buy” rating.
Risk tip: the risk of new business expansion is less than expected, the risk of intensified competition in the stationery industry, the risk of fiscal policy, and the risk of repeated epidemics.
