\u3000\u3 China Vanke Co.Ltd(000002) 705 Guangdong Xinbao Electrical Appliances Holdings Co.Ltd(002705) )
Investment logic
The company is one of the leading enterprises in the export of small household appliances in China. In recent years, the company has strengthened the business layout of domestic brands. Among them, the overseas brand Mofei, the sole agent, quickly broke through with innovative high-quality products + content grass planting marketing. From 2018 to 2021, the revenue scale expanded to RMB 1.66 billion at a compound growth rate of 125%, promoting the domestic business to become the main driving force for the growth of the company.
Domestic sales: the brand business has resumed growth, and Mofei’s new products are expected to continue to land. In 21 years, the prosperity of kitchen small household appliances industry was weak. Affected by the scenery and base number, Mofei in 21q2 declined (- 19%), but 21q3 has gradually recovered its growth trend (21q3 + 5%, 21q4 + 18%). Relying on the company’s rich experience in ODM business, Mofei brand has sufficient products to expand. In recent years, the revenue structure of Mofei brand has become more balanced (the revenue contribution of multifunctional pot and juice cup has been reduced to 40%). In 2022, it is expected that the brand renewal will be further accelerated to consolidate the advantages of kitchen appliances. At the same time, it will actively layout categories such as home environment and further open the growth space of domestic sales (the revenue growth rate of Mofei brand is expected to be 27% and 23% in 22 / 23).
Export: the profit can be repaired within the year and is expected to grow steadily in the long term. The export growth base of the company is expected to be stable in the short term and stable in the short term (the growth base of the company’s export is expected to be – 8% and – 1% respectively, and the growth rate of the company’s export is expected to remain small in the future). On the profit side, raw materials have a significant impact on the profit of export business, but the effect of early price adjustment has gradually appeared. The profit decline has narrowed since 21q3, and the profit is expected to be repaired steadily within 22 years. In the long run, the company continues to optimize the overseas order structure, which is expected to promote the steady and good overseas profitability (the gross profit margin of export sales in 22 / 23 is expected to be 15.8% and 16.8% respectively, boosting 1.5/1.0pct respectively).
Investment advice & profit forecast
The company has released the performance express for 2021, with a revenue of about 14.912 billion yuan, a year-on-year increase of + 13.05%, and a net profit attributable to the parent company of about 792 million yuan, a year-on-year increase of – 29.15%. We estimate that the total operating revenue of the company from 2021 to 2023 will be 14.912 billion yuan, 15.471 billion yuan and 17.049 billion yuan respectively, with a year-on-year increase of 13.05%, 3.75% and 10.20% respectively. The net profit attributable to the parent company from 2021 to 2023 is expected to be 792 million yuan, 999 million yuan and 1.219 billion yuan respectively, with a year-on-year increase of – 29.15%, + 26.06% and + 22.00% respectively. The current share price corresponds to PE from 2021 to 2023, which are 18x, 14x and 11x respectively. We select Shenzhen Crastal Technology Co.Ltd(300824) and other major small household electrical appliance enterprises as comparable companies. The average PE value of the main comparable companies in 2022 is 17x, giving the company a valuation of 17 times in 2022, corresponding to the target price of 21.0 yuan. It is covered for the first time and given a “buy” rating.
Risk tips
The expansion of new products is less than expected, the risk of increased foreign trade friction, the risk of sharp exchange rate fluctuation, the risk of sharp rise in raw material prices, and the risk of termination or non renewal of MOFTEC China’s authorization.
