\u3000\u3 Shengda Resources Co.Ltd(000603) 816 Jason Furniture (Hangzhou) Co.Ltd(603816) )
Event:
The company released the annual report of 2021, and the revenue / net profit attributable to parent company / net profit attributable to non parent company after deduction were RMB 18.34 billion, 16.6 billion and 1.43 billion respectively, with a year-on-year increase of + 44.8% / + 96.9% / + 141.6% (if the impact of goodwill is restored, the net profit attributable to parent company and net profit attributable to parent company after deduction are + 25.2% / 32.7% respectively); 1q2022 achieved revenue / net profit attributable to the parent company / net profit deducted from non attributable to the parent company of RMB 4.54/4.43/382 billion respectively, with a year-on-year increase of + 20.1% / + 15.1% / + 20.3% respectively.
Comments:
The performance in 2021 was in line with expectations and 1q2022 had a good start: in 2021, by category, sofa / bed / integrated products / customization achieved revenue of 92.7/33.4/31.4/660 million yuan respectively, with a year-on-year increase of + 44.5% / + 42.8% / 41.1% / 44.8% respectively. In 2021, the total number of stores of the company was 6456, a net decrease of 235 stores compared with that in 2020, but the average revenue generated by a single store was 2.84 million yuan, a year-on-year increase of + 50%. The decrease of stores and the significant increase of revenue generated by a single store were mainly due to the company’s continuous strengthening of the construction of retail capacity, the optimization of channels and the increase of the proportion of large stores in the overall stores. In terms of brands, independent brands / other brands achieved revenue of 14 / 3.65 billion yuan respectively, with a year-on-year increase of + 50.7% / 20.6% respectively. In terms of sub regions, the revenue of domestic / export sales reached 10.71/6.92 billion yuan respectively, with a year-on-year increase of + 40% / 48.7% respectively.
1q2022, we speculate that affected by the epidemic, domestic sales are about + 15% year-on-year and export sales are + 25% – 30% year-on-year; In terms of revenue by category, it is estimated that sofa is + 20% – 25% year-on-year, soft bed and mattress business is + 40% year-on-year, and customized business is + 20% year-on-year.
Rising costs have reduced profitability and excellent cost rate control: the company’s gross profit margin in 2021 was 28.9%, with a year-on-year increase of – 6.3pcts. There are three main reasons for the decline in profitability: first, the adjustment of accounting standards; second, the rise of raw material prices and transportation costs; third, the profitability of export is lower than that of China, and the growth rate of export is faster, which has reduced the comprehensive gross profit margin from a structural point of view. By product, the gross profit margin of sofa / bed / integrated products / customization was 29.5% / 33.2% / 24.8% / 32.4% respectively, with a year-on-year increase of – 3.0 / – 2.4 / + 0.6 / – 3.3pcts. In terms of sub regions, the gross profit margin of domestic / export sales was 34.5% / 18.1% respectively, with a year-on-year increase of -1.2 / + 0.97pcts respectively.
1q2022, the company’s gross profit margin was 29.9%, down from – 3.1pcts year-on-year. The main reason is that the domestic sales were affected by the epidemic, the shipment in March was limited, and the growth rate of export sales was higher than that of domestic sales, which reduced the gross profit margin in the current quarter from the perspective of revenue structure. At the same time, 1q2021, the company has not adjusted the transportation fee to the cost. We believe that with the improvement of the epidemic situation in 2Q China, the proportion of domestic sales is expected to increase, which will help the company recover its profitability. In addition, the recent decline in China’s MDI / TDI / polyether prices has also played a positive role in improving 2q profitability.
In 2021, the company’s period expense rate was 18.6%, with a year-on-year rate of – 6.1pcts. In terms of sub projects, the sales / management / financial expense rate was 14.7% / 1.8% / 0.4% respectively, with a year-on-year rate of – 5.0 / – 0.5 / – 0.6pcts respectively, and the R & D expense rate maintained an average of 1.6% compared with that in 2020. The decrease of expense rate during the period is mainly related to the adjustment of transportation expenses and the company’s good cost control ability.
1q2022, the company’s period expense rate was 18.3%, with a year-on-year rate of – 3pcts. By item, the sales / management / R & D / financial expense rate was 14.7% / 1.7% / 0.3%, with a year-on-year rate of – 3.3 / – 0.3 / + 0.2 / + 0.4pcts respectively. We believe that the decrease of sales expense rate is related to the change of domestic and foreign sales proportion and good cost control ability.
Category, integration of whole house mode and channels, and strengthening of retail capacity: in 2021, although the company’s customization business accounted for only 3.6% of revenue, its growth rate was high. With the continuous enhancement of customization business capacity, on February 19, 2022, Gu family released the strategic upgrade of “new generation of whole house customization +” at the “new generation of whole house customization + press conference”, and launched a 49800 yuan whole house package integrating customization and software, Extend its business focus from software to whole house mode. On the channel side, with the promotion of the 1 + N + X strategy, although the overall number of stores of the company has not increased significantly, the internal structure of the company continues to optimize and the proportion of large stores continues to increase. We believe that the company will continue to increase the proportion of large stores. On the one hand, the increase of the proportion of large stores is the objective need of the company’s transformation from manufacturing brand to retail brand, on the other hand, it is also the business level, from simply selling software and series, The physical space foundation for the transformation to the overall scheme supplier of the whole house.
The industry boom is expected to pick up at the bottom, and the company’s valuation is at the bottom, maintaining the “buy” rating: we expect the company’s EPS to be 3.26/4.03/4.95 yuan from 2022 to 2024, and the corresponding PE of the current stock price is 18 / 14 / 12 times respectively. According to wind data, since 2013, the median price earnings ratio of TTM in the home sector is 34 times, and the current price earnings ratio of TTM in the home sector is 20 times. At the same time, according to the statistics of China Index Research Institute, in the first quarter, the governments of more than 60 cities in China began to relax the real estate restrictions, which will help the prosperity of the home industry rise and improve the valuation level of the industry. Given that the industry valuation is at the bottom, the industry boom is expected to rise, and the company, as a software head company, has good growth prospects. At the same time, the current valuation level is low, maintaining the “buy” rating.
Risk tip: China’s real estate sales are lower than expected, and the rise in raw material prices is higher than expected.
