\u3000\u3 China Vanke Co.Ltd(000002) 293 Luolai Lifestyle Technology Co.Ltd(002293) )
The company released the 2021 annual report & the first quarterly report of 2022: 1) in 2021, the revenue was 5.760 billion yuan / year-on-year + 17.30%, the net profit attributable to the parent was 713 million yuan / year-on-year + 21.92%, which was higher than the year-on-year growth rate of 2.16% / 7.13% in 2019 / 2020, and the cash dividend was 6 yuan (including tax) for every 10 shares, and the cash dividend in 2021 reached 1 billion yuan. The performance side slightly exceeded our expectations, mainly due to the improvement of omni-channel gross profit margin, which led to the improvement of profitability. Quarter by quarter, the revenue of Q1-Q4 in 2021 increased by 48.7% / 19.2% / 9.0% / 6.5% year-on-year respectively, and the net profit attributable to the parent company increased by + 156.2% / + 3.9% / + 7.0% / – 0.2% year-on-year respectively, slowing down quarter by quarter, mainly due to the low base before 2020 and the high base after 2020, the impact of the epidemic on Q3 in the middle of 21 years, and the shortage of goods on double 11, which affected the performance of Q4. 2) In 2022q1, the revenue / net profit attributable to the parent company increased from – 2.49% / – 12.81% to RMB 1.286159 billion respectively year-on-year, mainly due to the impact of the epidemic on Shanghai direct sales and franchise logistics in March, including a slight decline in China’s home textile revenue and a decline in the high single digit of American furniture.
Consolidate brand differentiation positioning online and accelerate store expansion offline. 1) Online: consolidate the first position in the industry. Online revenue in 2021 was +13.59% year-on-year, accounting for 28%. Online Luo Lai and Le cob double brand parallel, in 2021 to enhance product prices to achieve brand differentiation, strengthen brand positioning, balance Wuxi Online Offline Communication Information Technology Co.Ltd(300959) development, revenue growth slowed down compared with 26.3% in 2020, but the brand image was consolidated, double eleven Luolai Lifestyle Technology Co.Ltd(002293) ranked first in the whole network GMV, Tmall, vip.com home textiles category first, trembling tiktok family category first. 2) Franchise: the strategy of expanding stores is promoted in an orderly manner. The franchise revenue in 2021 was + 22.78% year-on-year, accounting for 35%. By the end of 2021, there were 2220 franchised stores, with a net increase of 241 stores / yoy + 12.18%. In 2020, the company calculated the store opening space in combination with the local population size and residents’ income, and established a franchise based accelerated store opening strategy. The number of stores is expected to increase by nearly 10% annually in 3-5 years. In 2021, the extension of store opening and the improvement of store efficiency contribute about 12% / 9% to the growth of franchise channel revenue respectively. We expect that the growth trend of franchise channel is expected to continue under the orderly promotion of store expansion strategy. 3) Direct sales: the improvement of store efficiency mainly contributes to the growth. In 2021, the direct sales revenue was + 10.88% year-on-year, accounting for 6%. By the end of 2021, there were 261 Direct stores / a net increase of 4 stores / yoy + 1.56%. The extension of stores and the improvement of store efficiency contributed about 2% / 9% to the growth of direct channel revenue respectively. 4) American furniture: benefiting from the rapid growth of American real estate boom. US furniture revenue in 2021 was + 21.64% year-on-year, accounting for 19%. 2021h1 / H2 increased by 47.06% / 6.26% year-on-year respectively. In the second half of the year, affected by the weakening of the U.S. real estate boom and shipping problems (tight transportation capacity and rising freight prices), the company took measures to increase the customer unit price. However, due to the slow turnover of furniture products, the effect of price increase will be delayed until the end of the year to 2022.
In 2021, the profitability and operation efficiency were improved, and 2022q1 was affected by the epidemic. 1) Gross profit margin: thanks to the increase in the proportion of high-end product sales and customer unit price, the gross profit margin in 2021 was + 1.82pct to 45% year-on-year, of which the gross profit margin of online / direct sales / franchise / us was + 2.02/2.53/1.94/2.19pct to 48.45% / 66.43% / 45.31% / 37.19% year-on-year respectively. Affected by the epidemic in 2022q1, the gross profit margin increased from -0.6pct to 41.85% year-on-year. We expect that if the epidemic eases in May, the annual gross profit margin is expected to continue to improve. 2) Expense ratio: during 2021, the expense ratio increased from + 1.56pct to 27.99% year-on-year, of which the sales / management / R & D / financial expense ratio increased by + 0.52/0.38/0.10/0.56pct year-on-year respectively. The increase in sales expenses was mainly due to the increase in advertising investment and financial expenses, mainly due to the decrease in interest income. In 2022q1, the expense rate continued to rise from + 1.78pct to 27.39% year-on-year. 3) Net interest rate: comprehensive changes in gross profit rate and expense rate. The net interest rate in 2021 is + 0.4pct to 12.48% year-on-year, and the net interest rate in 2022q1 is -1.46pct to 12.41% year-on-year. 4) Inventory: the inventory at the end of 2021 is 1.313 billion yuan / yoy + 14.9%, and the inventory at the end of 2022q1 is 1.315 billion yuan / yoy + 12.7%. The inventory turnover days in 2021 / 2022q1 are – 13 / + 21 days to 140 / 158 days respectively year-on-year. 5) Cash flow: the net cash flow from operating activities in 2021 / 2022q1 was – 14.48% / 34.54% to RMB 728 / 20 million respectively year-on-year. The decline in net cash flow from operating activities in 2021 was mainly due to more cash dividend expenses, expenses arising from equity incentive of American team and increase in inventory scale. As of 2021q1, the funds in the account were 1.042 billion and abundant.
Profit forecast and investment rating: the company is the leader of China’s home textile industry. In 2021, the online dual brands will be parallel, the brand differentiation positioning will be consolidated, the offline store expansion strategy will be accelerated, and the income and profitability will be improved. As the company’s main market is in East China, various financial indicators of 22q1 are affected by the epidemic to varying degrees, but the company’s counter market expansion has a long-term perspective and clear planning, and the certainty of future performance growth is still strong. The cumulative dividend ratio in 2021 will exceed 100%, and the high dividend trend is expected to continue in the future. Considering the impact of the epidemic and the plan to open 150 stores in 22 years, we will reduce the growth rate of net profit attributable to the parent company in 2022 from 17.1% to 8.5%. It is expected that the growth rate of net profit attributable to the parent company in 202324 will be 16.7%/14.2% year-on-year respectively, and the EPS in 202224 will be 0.92/1.08/1.23 yuan / share respectively, corresponding to pe14/12/11x, maintaining the “buy” rating.
Risk tips: the epidemic situation worsens, the economy is weak, and the expansion of stores is less than expected.
