Chenguang Co., Ltd. ( Shanghai M&G Stationery Inc(603899) )
Event: Chenguang achieved a revenue of 17.607 billion yuan in 2021, 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 non net profit deducted was 1.35 billion yuan, a year-on-year increase of + 22.38%. From the perspective of single quarter, the single quarter revenue of 21q1-4 was 38.12/38.74/44.65/5.446 billion yuan respectively, with a year-on-year increase of + 82.96% / 44.68% / 18.25% / 18.61%; The net profit attributable to the parent company was RMB 328 / 3.38 / 4.51 / 401 million, a year-on-year increase of + 42.50% / 44.34% / 0.57% / 16.98%.
The gross profit margin of the company decreased slightly, and the overall rate decreased steadily. Gross profit margin: in 2021, the company’s gross profit margin was 23.21%, with a year-on-year increase of -2.15pct. From the perspective of products, the gross profit margin of writing instruments / student stationery / office stationery / office direct sales was 40.57% / 33.10% / 27.91% / 9.37% respectively, with a year-on-year increase of -0.26pct / – 0.33pct / – 0.34pct / – 1.61pct, mainly due to the rise in the price of raw materials and the increase in the proportion of low gross profit kelip business. Expense side: in 2021, the company’s sales expense rate / management expense rate / financial expense rate / R & D expense rate were 7.94% / 4.23% / 0.04% / 1.07% respectively, with a year-on-year rate of -0.46pct / – 0.36pct / – 0.03pct / – 0.15pct. The company’s R & D investment remained stable, lean management continued to promote, and the effect of cost reduction and efficiency increase was remarkable.
Traditional business: reduce the quantity and improve the quality of product SKU, diversify the layout of channels, and continuously expand the brand territory. Product side: in 2021, the revenue of traditional business reached 8.88 billion yuan, a year-on-year increase of + 17.22%; From the perspective of products, the revenue of writing instruments / student stationery / office stationery was 2.820/31.28/3.338 billion yuan respectively, with a year-on-year increase of + 23.65% / 15.61% / 18.32%, accounting for 16.01% / 17.77% / 18.96% of the revenue, and the average sales price was 1.04/0.55/1.76 yuan respectively, with a year-on-year increase of + 5.09% / 7.49% / 0.30%. The traditional business maintained steady growth, product R & D focused on reducing and improving quality, and the added value of single products gradually increased; Channel side: multi-point layout, Omni channel operation, fine management of offline channels, Chenguang alliance app serves more than 100000 terminal stores, and an automatic channel replenishment mechanism has been established; On line tiktok Kwai Chung has continued to promote new channel businesses such as spelling, shaking, and fast hand. As of the end of 2021, the number of members of Tmall flagship store in Chenguang has exceeded 100 million. In 2021, Chenguang technology revenue was 527 million yuan, up +11.26%. Brand side: acquire domestic and foreign brands, continuously expand the brand territory, and acquire Norwegian schoolbag brand Beckmann Beckman in August 2021. The product matrix is constantly enriched and the market share of segments continues to increase.
Chenguang kelipu: government and enterprise customers continue to develop, and the business scale continues to grow rapidly. In 2021, Chenguang kelipu achieved a revenue of RMB 7.766 billion, a year-on-year increase of + 55.30%, and a net profit of RMB 242 million, a year-on-year increase of + 68.25%, accounting for 44.10% of the revenue. In terms of customers, central enterprises are shortlisted for projects such as national energy group and China General Technology Group; Government and enterprises were shortlisted for Jiangsu provincial government procurement online mall and other projects; The group has more than 6 million customers in terms of purchasing space and logistics network, and has won the bid in terms of national production and distribution network, with more than 6 million customers. The company actively expanded new categories and new business opportunities such as MRO and marketing gifts, continued to improve the brand influence in the office direct sales market, and was selected as the “specialized and special new” enterprise in Shanghai in 2020.
Jiumu debris agency: strategic positioning bridgehead, performance loss gradually improved. In 2021, large retail stores achieved a revenue of 1.054 billion yuan, a year-on-year increase of + 60.96%, a net profit of – 21 million yuan, and an average revenue of 1.7427 million yuan per store, of which Jiumu sundries club had a revenue of 949 million yuan, a year-on-year increase of + 70.01%, a net profit of – 23 million yuan, and an average revenue of 2.0508 million yuan per store; By the end of 2021, there were 523 large retail stores in China, including 60 Chenguang life hall and 463 Jiumu sundry Agency (319 Direct stores and 144 franchisees). Jiumu sundries agency has established a dynamic analysis platform for commodities, continuously improved the operation efficiency of stores, promoted the improvement of single store quality, and actively improved the activity of members. It has accumulated more than one million registered members. It is committed to becoming a leading medium and high-end cultural and creative grocery retail brand in China and driving Chenguang’s high-end product development. The short-term epidemic disturbs or affects the sales volume of offline retail stores in the first quarter. In the medium and long term, it continues to be optimistic about the performance increment provided by retail stores. It is planned to add 100 + stores in 2022.
Profit forecast and investment suggestions: “one body” cuts through thorns and thorns to support the steady growth of performance, and “two wings” ride the wind and waves to provide high growth factors of performance. On the traditional business side, R & D investment drives product upgrading, high-quality cultural and creative products increase product premium, and high-end stationery may open up profit space; The office direct selling end, government and enterprise customers and MRO continued to develop, the business grew rapidly, and the company’s valuation continued to be improved; At the end of large retail stores, the number of stores of Jiumu sundry agency continues to expand, and the improvement of operating capacity is expected to provide new increment of performance; On the online sales side, in 2021, the company’s five-year strategy clearly improves the proportion of online sales. With the revenue of Chenguang technology increasing year by year, the company’s performance is expected to further increase. The company’s retail stores and Chenguang kelipu have rapid growth potential. Based on the leading position of the company’s stationery and broad overseas market space, the company is expected to become a “world-class Chenguang” and give a certain valuation premium. It is estimated that from 2022 to 2024, the company will realize an operating revenue of 21.582/25.982/30.625 billion yuan, a year-on-year increase of + 22.6% / 20.4% / 17.9%; The net profit attributable to the parent company is expected to be RMB 1.827/2.147/2.510 billion, with a year-on-year increase of + 20.4% / 17.5% / 16.9%; EPS is expected to be 1.97/2.31/2.70 yuan respectively, and the corresponding PE valuation is 24.4x/20.8x/17.8x respectively, maintaining the “buy” rating.
Risk warning: the cost of raw materials is rising; The birth rate has declined; Continuous academic burden reduction; Electronic office trend.
