Chenguang Co., Ltd. ( Shanghai M&G Stationery Inc(603899) )
Key investment points
Summary of performance: the company released] the annual report of 2021, and achieved revenue of 17.61 billion yuan (+ 34%) in 2021; The net profit attributable to the parent company was 1.52 billion yuan (+ 20.9%); The net profit deducted from non parent company was 1.35 billion yuan (+ 22.4%). Among them, Q4 company achieved an operating revenue of 5.46 billion yuan (+ 18.6%) in 2021; The net profit attributable to the parent company was 400 million yuan (+ 17%).
Business structure changes, profitability fell slightly. In 2021, the company’s overall gross profit margin was 23.2% (- 2.2pp), mainly due to the increase in the proportion of office direct sales business with low gross profit margin. In 2021, the gross profit margin of the company’s office direct sales was 9.4% (- 1.6pp), that of office stationery was 27.9% (- 0.3pp), that of student stationery was 33.1% (- 0.3pp), and that of writing instruments was 40.6% (- 0.3pp). In terms of expense rate, the overall expense rate of the company in 2021 was 13.3% (- 1pp). Among them, the company’s sales / R & D expense ratio is 7.9% (- 0.5pp) / 1.1% (- 0.1pp); The management fee rate is 4.2% (- 0.4pp); The financial expense rate is 0.04% (-0.03pp). Overall, the company’s net interest rate was 8.6%, a year-on-year decrease of 0.9pp. In 2021, the company realized net operating cash flow of 1.56 billion yuan, with a year-on-year increase of 22.8%.
Consolidate the advantages of core business and realize the rapid growth of new business. The company’s traditional core business realized a revenue of 8.88 billion yuan, a year-on-year increase of 17%; Klip’s revenue was 7.77 billion yuan, a year-on-year increase of 55%. Chenguang living hall (including Jiumu sundries Club) achieved an operating revenue of 1.05 billion yuan, a year-on-year increase of 60%; Among them, Jiumu sundry agency realized an operating revenue of 950 million yuan, a year-on-year increase of 70%. The revenue of Chenguang technology was 530 million yuan, an increase of 11.3%. On the whole, the company comprehensively uses the advantages of channel, brand, design, R & D and supply chain to comprehensively promote the stable development of traditional core business and improve the proportion of high-quality cultural and creative products in traditional channels. At the same time, the company continues to develop and expand its new business and improve the market sales proportion of Chenguang brand. It is expected that in the future, with the gradual maturity of the boutique cultural and creative track, the new business of office direct sales and retail stores is expected to grow rapidly and improve the overall profitability of the company.
Promote Omni channel layout and improve retail service capacity. In 2021, the company has 36 first-class partners, second-class and third-class partners and key customers covering 1200 cities in China, more than 80000 retail terminals using the signboard of ” Shanghai M&G Stationery Inc(603899) ” stores and 523 large direct retail stores. Among them, there are 60 Chenguang life halls, 463 Jiumu sundry clubs (319 directly operated and 144 franchised), and Jiumu has increased by 102 over the beginning of the year. The promotion of opening stores is in line with expectations. In the face of repeated interference from the epidemic, the business of Chenguang retail stores still maintained a bright growth. The net profit of the living hall (including Jiumu) in 2021 was – 21.09 million yuan, which was significantly lower than that in 2020. The loss of Chenguang technology has expanded, and we look forward to the continuous improvement of business optimization.
Profit forecast and investment suggestions. It is estimated that the EPS from 2022 to 2024 will be 2.01 yuan, 2.42 yuan and 2.83 yuan respectively, and the corresponding PE will be 24 times, 20 times and 17 times respectively, maintaining the “buy” rating.
Risk warning: the risk that the sales growth of traditional business is less than expected; The risk that the promotion of new business is not as expected; Downside risk of profit margin.
