Chenguang Co., Ltd. ( Shanghai M&G Stationery Inc(603899) )
Key investment points
The performance is in line with market expectations. In 2021, the company realized an operating revenue of 17.607 billion yuan, a year-on-year increase of + 34.02%; The net profit attributable to the parent company was 1.518 billion yuan, a year-on-year increase of + 20.90%.
The traditional retail business was gradually repaired, and klip continued to grow rapidly. The revenue of traditional retail business (including ASUS) in 2021 was 8.26 billion yuan, a year-on-year increase of + 18.2%; The net profit is about 1.45 billion yuan (including an Shuo’s loss of 77.28 million yuan), and the net interest rate is about 17.6%. Among them, the revenue of 2021q4 was 2.211 billion yuan, a year-on-year increase of + 5%. The implementation of the double reduction policy in 2021q3 and the spread of local epidemic have put pressure on the growth of traditional business, and the traditional business in 2021q4 has been repaired to some extent. Chenguang technology’s revenue in 2021 was 527 million yuan, a year-on-year increase of + 11%. In 2021, the revenue of klip business was 7.77 billion yuan, a year-on-year increase of + 55.3%; The net profit was 242 million yuan, up + 68.3% year-on-year, and the net profit margin was + 0.24pp to 3.12% year-on-year. Among them, the revenue of 2021q4 was 2.83 billion yuan, a year-on-year increase of + 32.5%. Under the high base of business, klip still achieved rapid growth, and the improvement of scale effect and operation efficiency drove the net interest rate to rise gradually.
The loss of Jiumu sundry agency decreased significantly. In 2021, the business income of large retail stores was 1.054 billion yuan, a year-on-year increase of + 61%; Among them, the income of Jiumu sundries club was 950 million yuan, a year-on-year increase of + 70%. The income of 2021q4 living hall was 280 million yuan, a year-on-year increase of + 25%. By the end of 2021, the number of large retail stores of the company had reached 523, including a net increase of 102 to 463 in Jiumu sundry Club (a net increase of 82 to 319 in direct sales and 20 to 144 in franchise). In 2021, the loss of Jiumu sundry agency decreased significantly, from 19.52 million yuan to 22.56 million yuan compared with 2020.
The share of writing instruments continued to increase, and the structure was upgraded to resist the upward pressure of costs. In terms of products, the company’s revenue from writing instruments in 2021 was 2.82 billion yuan, a year-on-year increase of + 23.7%; The gross profit margin decreased slightly by 0.25pp to 40.57% on a year-on-year basis. The income of students’ stationery was 3.13 billion yuan, a year-on-year increase of + 15.6%; The gross profit margin decreased slightly by 0.33pp to 33.1% on a year-on-year basis. The income of office stationery was 3.34 billion yuan, a year-on-year increase of + 18.3%; The gross profit margin decreased slightly by 0.34pp to 27.9% on a year-on-year basis. The income from other products was 550 million yuan, a year-on-year increase of + 69.8%; Gross profit margin + 0.48pp to 44.8% year on year. According to China light industry network, in 2021, the operating revenue of the National Stationery manufacturing industry was + 13% year-on-year, and that of the pen manufacturing industry was + 1.26% year-on-year. The growth rate of the company exceeded that of the industry, and the share of writing instruments increased more; At the same time, thanks to the continuous optimization of product structure, it still maintains a relatively stable gross profit margin in the environment with more upward raw material costs.
Excellent cash flow and operating efficiency. In 2021, the company realized an operating cash flow of 1.56 billion yuan, a year-on-year increase of + 22.8%; The operating cash flow / net income from operating activities was 94.2%, the sales cash flow / operating income was 106.6%, and the cash flow performance was excellent. In 2021, the operation efficiency was significantly optimized. The days of inventory turnover decreased by 11.4 days and the days of receivable turnover decreased by 1.9 days.
Profit forecast and investment rating: the traditional business is gradually repaired. We maintain the company’s net profit attributable to the parent company of RMB 1.8 billion and 2.1 billion from 2022 to 2023, and the net profit attributable to the parent company in 2024 is expected to be RMB 2.5 billion, corresponding to EPS of 1.91, 2.28 and 2.70 respectively, corresponding to pe25, 21 and 18x. The company’s channel advantages continue to deepen, and the high-end strategy is expected to drive the continuous improvement of profitability and maintain the “buy” rating.
Risk tips: intensified industry competition, fluctuations in raw material prices, and the impact of education policies on demand.
