Chenguang Co., Ltd. ( Shanghai M&G Stationery Inc(603899) )
The company released the annual report of 2021: 21a achieved revenue of 17.607 billion yuan (+ 34.02%), net profit attributable to the parent company of 1.518 billion yuan (+ 20.94%), deducting non net profit of 1.35 billion yuan (+ 22.38%), and non recurring profits and losses are mainly government subsidies (164 million yuan in 21 years); Among them, 21q4 achieved a revenue of 5.456 billion yuan (+ 18.61%), a net profit attributable to the parent company of 401 million yuan (+ 16.98%), and a net profit of 357 million yuan (+ 15.35%), which slightly exceeded the previous expectations under the influence of high base, epidemic situation and double reduction.
Key investment points
Traditional business: product reduction and quality improvement, omni-channel location, first digital
2021a traditional core business (including Chenguang technology and ASUS) has a revenue of 8.788 billion yuan (+ 17.44%), a net profit of 1.363 billion yuan (+ 15.06%), and a net interest rate of 15.51% (- 0.32pct), excluding ASUS and Chenguang technology, a net interest rate of 17.84% (- 0.57pct); 21q4 achieved a revenue of 2.343 billion yuan (+ 4.58%), a net profit of 327 million yuan (+ 19.29%), and a net interest rate of 13.96% (+ 1.72pct). It is estimated that the growth rate of Q4 revenue has increased month on month compared with Q3. Specifically, during the period, ASUS was still suppressed by the export business. It is expected that the revenue scale of 21a will be nearly 300 million yuan and the net profit will be – 77 million yuan (the same period last year – 79 million yuan). It is expected that the performance will improve after the overseas epidemic repair and the decline of sea freight; The 21a revenue of Chenguang technology business was 527 million yuan (+ 11.26%), the net profit was – 25 million yuan (the same period last year – 12 million yuan), and the single 21q4 revenue was 131 million yuan (- 3.29%). During the period, the company began to optimize the online direct sales structure and improve the operation quality.
In terms of sub categories, each category still achieved steady growth under the high base, the unit price continued to rise, and the raw material cost & structural adjustment slightly affected the performance of gross profit margin. (1) Writing instruments: the revenue of 21a is 2.82 billion yuan (+ 23.67%), the gross profit margin is 40.57% (-0.26pct), the average sales price is 1.03 yuan (+ 4.96%), and the product structure continues to upgrade; The revenue of 21q4 was 447 million yuan (+ 8.69%), and the gross profit margin was 43.65% (-0.62pct). (2) Student stationery: the income of 21a is 3.128 billion yuan (+ 15.60%), the gross profit margin is 33.10% (-0.33pct), and the average sales price is 0.54 yuan (+ 7.47%); The revenue of 21q4 was 750 million yuan (+ 8.37%), the gross profit margin was 32.78% (+ 1.39pct), and the growth rate of Q4 revenue became positive. (3) Office stationery: the revenue of 21a is 3.338 billion yuan (+ 18.34%), the gross profit margin is 27.91% (-0.20pct), and the average sales price is 1.76 yuan (- 0.12%); The revenue of 21q4 is 1.259 billion yuan (+ 2.41%), and the gross profit margin is 30.68% (-0.20pct). The growth rate slows down under the high base. During the reporting period, (1) adjusting product structure and promoting growth: reducing product development and improving quality, accurately developing popular products, and significantly improving the contribution of single products; Increase R & D investment, actively carry out forward-looking research, focus on the development of core technologies and improve product competitiveness. (2) Omni channel and multi contact layout: Omni channel layout, with multi-level distribution as the main body, continuously promote the quality improvement of single stores of terminal stores through various digital tools, actively develop online business and direct supply business, shorten the contact chain of terminal customers, form an omni channel and multi contact layout, and further promote the transformation of the company from wholesaler to brand retail service provider. (3) Promote digitalization and form new organizational capabilities.
Looking forward to the next 22 years, the product end companies will focus on increasing the market share of products such as high potential and low market share, traffic categories and focus on this volume. At the channel level, the company continued offline retail terminals, reduced the threshold of store upgrading (increased the proportion of benchmark stores), enhanced the operation efficiency of single stores through alliance app, paid attention to the construction of boutique stores and increased the proportion of core business districts; Optimize the direct sales structure and dealer distribution online, and focus on the share improvement of key categories. With the omni channel layout and continuous high-end products, we firmly look at the growth and Realization under the strong operation strength.
Klipp’s beautiful cash and rising profitability
The revenue of klip 21a was 7.766 billion yuan (+ 55.31%), the gross profit margin was 9.37% (- 1.61pct), and the net profit margin was 3.12% (+ 0.24%). The decline in gross profit margin was mainly due to the increase in the proportion of landing service providers; 21q4 klip’s revenue is 2.833 billion yuan (+ 32.56%), and its gross profit margin is 9.07% (+ 0.42pct). We calculate that the net profit margin is about 4.09% (+ 0.41pct). With the improvement of scale effect, its profitability continues to rise. During the period, the company actively developed high-quality customers – MRO category expansion: in terms of central enterprise customers, the company was shortlisted for projects such as national energy group and China General Technology Group; Government customers are shortlisted for Jiangsu provincial government procurement online mall and other projects; MRO won the bid for Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) group, China nuclear industry group and other projects. In addition, the company continuously promotes the supply chain upgrading, on the one hand, the scale purchase reduces the cost. On the other hand, the warehousing logistics system is continuously optimized. The 5 level storage system network effectively covers the whole country, and the intelligent system improves the operational efficiency. At the same time, the company builds 7 major regional distribution centers in China, and the logistics network covers 100% of the Chinese mainland counties and counties, so as to lay a solid foundation for providing timely services to customers. Looking forward to 22 years, the company will continue to explore high-quality customers, tap existing customers, coordinate supply chain upgrading and digital construction, and extend MRO & marketing gift category. It is expected that klip will continue its high growth trend.
The business of large retail stores has reduced losses and is optimistic about the continuous improvement of business quality
By the end of the 21st century, there were 463 stores in jiumumen (102 in annual net increase and 27 in Q4 net increase) and 60 stores in life hall. The 21a retail store business achieved a revenue of 1.054 billion yuan (+ 60.93%), including Jiumu’s revenue of 949 million yuan (+ 70.16%), and a net profit of – 21 million yuan (the same period last year – 50 million yuan), which successfully reduced losses; The revenue of 21q4 was 280 million yuan (+ 41.56%), with repeated epidemics and slight loss in a single quarter. During the period, Jiumu built a commodity dynamic analysis platform, and the commodity operation capacity and efficiency continued to improve; At the same time, improve the operation quality of stores through store display, marketing promotion and clerk training, and analyze and assess key operation indicators at the same time; In addition, the membership system of Jiumu has been gradually improved. At present, more than one million members have been registered. Looking forward to the next 22 years, major retail stores are expected to maintain the opening speed of 100 stores and continuously optimize the operation quality (the current flat efficiency has reached 20000 +). The short-term epidemic has a slight impact on the offline traffic, but the medium-term dimension is still optimistic about the large-scale performance after the model runs through.
A new five-year journey, focusing on high-end, online and Globalization
In 2021, the company launched a new five-year plan. Based on the basic sector of traditional business, the company focused on traffic change and whole scene construction, and promoted high-end, online and globalization. On the one hand, the company continues to cultivate traditional business, seize market share, and improve the operation quality of terminal outlets by relying on retail service capability and digital tools; Actively grasp the traffic changes and explore the direct supply mode & DTC link construction; Adjust the structure of products to promote growth and actively promote the process of high-end. On the other hand, the company continues to tap into the growth potential of office direct sales business, new and old customers increase in volume & category development, contribute to scale increment, supply chain upgrading & large-scale operation, and increase profitability.
In addition, the company positioned Jiumu as the bridgehead of Chenguang brand and product upgrading, which is an important part of DTC construction. The company continued to promote the improvement of Jiumu’s operation capacity and efficiency with the help of digital means. At present, the company has entered the acceleration period of reform, and is optimistic about the reform results under the strong operation strength of the company.
Adjustment of revenue structure: the rise of raw material cost has slightly dragged down the profit margin, and the cash flow is beautiful
In 2021, the company’s comprehensive gross profit margin was 23.21% (- 2.15pct), which was mainly due to the rise of kelipu’s share and the rise of raw material costs; During the period, the expense rate was 13.28% (-0.99pct), of which the sales expense rate was 7.94% (-0.46pct), the management expense rate was 4.23% (-0.36pct), the financial expense rate was 0.04% (-0.03pct), and the R & D expense rate was 1.07% (-0.15pct), corresponding to the parent company’s net profit rate of 8.62% (-0.94pct). The total amount of accounts receivable and accounts payable of the company was RMB 2.8 billion, an increase of RMB 1.01 billion compared with that at the beginning of 2028; The inventory was 1.547 billion yuan (an increase of 224 million yuan compared with the beginning of the period), and the turnover days decreased by 3.39 days to 38.2 days compared with the same period last year, maintaining a sound operation. In terms of cash flow, the net operating cash flow of the company at the end of the period was 1.561 billion yuan, an increase of 289 million yuan over the same period of last year.
Profit forecast and valuation
The company’s short-term growth is steady and good quarter by quarter. In the new round of five-year plan in the medium term, the competitiveness of traditional businesses is consolidated and new businesses enter the stage of performance release. We expect to achieve revenue of 20.913/25.99/30.234 billion yuan from 2022 to 2024, with a year-on-year increase of 18.77% / 20.02% / 20.46%; The net profit attributable to the parent company was RMB 1.780/2.108/2.496 billion, with a year-on-year increase of 17.28% / 18.40% / 18.43%, and the corresponding PE was 25.96x/21.92x/18.51x respectively. It is recommended to pay attention to the bottom of the valuation and maintain the buy rating.
Risk tips
The epidemic repeatedly affects offline traffic, online development is less than expected, and new product promotion is less than expected
