\u3000\u3 Shengda Resources Co.Ltd(000603) 833 Oppein Home Group Inc(603833) )
Event:
The company released the 2021 annual report, and the revenue / net profit attributable to parent company / net profit deducted from non attributable to parent company were RMB 20.44/26.7/2.51 billion respectively, with a year-on-year increase of + 38.7% / + 29.2% / + 29.7% respectively; 4q2021 achieved revenue / net profit attributable to the parent company / net profit deducted from non attributable to the parent company of RMB 6.04/5.5/500 million respectively, with a year-on-year increase of + 20.6% / – 9.8% / – 9.4% respectively. In 2021, the company’s dividend plan is to pay out 17.5 yuan (including tax) for every 10 shares.
Comments:
Wardrobe and accessories increased significantly, driving the overall growth: in 2021, wardrobe and accessories / kitchen cabinet / wooden door / bathroom achieved revenue of 101.7/75.2/12.4/990 million yuan respectively, with a year-on-year increase of + 49.5% / + 24.2% / + 60.4% / + 33.7% respectively. In 2021, the company integrated wardrobe and accessories in terms of disclosure caliber. We estimated that the annual revenue of wardrobe and accessories was approximately 8.1 billion and 2.07 billion respectively. It is estimated that the year-on-year growth rate of wardrobe revenue in 2021 is 40.3%. In 2021, there were 2201 / 2459 / 805 / 1021 stores for wardrobe / kitchen cabinet / wooden door / bathroom respectively, with an increase of 77 / 52 / 217 / – 44 stores respectively. In 2021, the revenue of wardrobe business exceeded that of cabinets, ranking first among all products. The revenue of wardrobe and accessories accounted for nearly half of the total revenue, reaching 49.8%. From the perspective of products, wardrobe and accessories are the core driving force for European school to continue to maintain high growth in the future.
In terms of channels, the revenue of direct sales / distribution / bulk channels was RMB 590 million / 15.68 million / 3.67 billion respectively, with a year-on-year increase of + 47.3% / + 40.2% / + 36.9% respectively. In 2021, the total number of the company’s dealer stores was 7475, a net increase of 363 stores compared with 2020, and the total number of Direct stores was 47, a net increase of 2 stores compared with 2020. From 2017 to 2021, the company’s average single store revenue increased from 1.21 million yuan to 1.96 million yuan, with a CAGR of 13%, which witnessed the process of European School from cabinet (improving the matching rate of cabinet and electricity) to the whole house, and then to large home, constantly iteratively upgrading business formats and increasing customer single value.
By brand, in 2021, europay / opaline / opaline achieved revenue of RMB 17.46/14.3/1.24 billion respectively, with a year-on-year increase of + 35.6% / + 65% / + 60.4% respectively.
4q2021. By product, the revenue of kitchen cabinet / wooden door / bathroom was 2.13/3.99/296 billion yuan respectively, with a year-on-year increase of + 10.5% / + 60.4% / + 33.7% respectively. We estimate that the revenue of wardrobe is 2.36 billion yuan, with a year-on-year increase of + 20.5%. In terms of sub channels, the revenue of direct sales / distribution / bulk channels was RMB 220 million / 45.8 million / 1.04 billion respectively, with a year-on-year increase of + 33.8% / + 21.2% / + 21.9% respectively. When 4q2021 real estate default event was at the forefront, the bulk business of the company still maintained a good growth, highlighting the strong risk control ability of leading enterprises.
The profitability has declined, and the cost control during the period is good: in 2021, the company’s gross profit margin was – 3.4pcts to 31.6% year-on-year. We believe that the decline in profitability is mainly affected by the rise in raw material prices and the increase in subsidies. By product, the gross profit margin of wardrobe and accessories / cabinet / wooden door / bathroom was 32.2% / 34.4% / 13.8% / 25.4% respectively, with a year-on-year increase of – 4.2 / – 1.8 / – 0.1 / – 1.3pcts. In terms of channels, the gross profit margin of direct sales / distribution / bulk channels was 64.1% / 30.3% / 30.8% respectively, with a year-on-year increase of – 2.2 / – 3.8 / – 1.9pcts respectively. In terms of brands, the gross profit margin of europay / opelli was 32.5% / 33.2% respectively, with a year-on-year increase of – 3.3 / – 4.1pcts respectively.
During 2021, the expense rate was 16.2%, with a year-on-year increase of -2.6pcts. By item, the rates of sales / management / R & D / financial expenses were 6.8% / 5.5% / 4.4% / – 0.6% respectively, with a year-on-year increase of -1.0 / – 1.0 / – 0.3 / – 0.3pcts respectively. We believe that the reduction of expense rate is mainly due to the company’s good control of expenses and scale effect.
The whole decoration business has made great progress, and the joint venture model has promoted the full development of the large home business. In 2021, the company achieved dual brands to enter the packaged home track through “europay” and the new brand “starhomes Star home”. In 2021, the performance of the company’s packaged home orders increased by more than 90% year-on-year. We expect that the packaged business accounts for nearly 10% of the company’s overall revenue. In April 2022, the company issued an invitation to dealers across the country to establish a joint venture in the core city through the joint venture mode with europay group, which is responsible for setting up a three-dimensional drainage large home exhibition center in the city, employing the managing director inside and outside the system to form an independent team to operate, and exploring and promoting the new model of “customized decoration integration”. We believe that the company’s willingness to promote the layout of large household business in the country in the form of joint venture is a sign of European School’s confidence and desire to accelerate the promotion of large household business on the basis of several years of exploration, effective improvement of supply chain management ability, significant enhancement of informatization ability and further enhancement of the market position of core categories. It is also a sign of China’s real estate industry’s shift from increment to stock market, Forced the home furnishing industry to follow the trend under the background of big customer unit price.
The difference from the previous development mode of the whole decoration business is that the drainage direction between the joint venture large home store and the decoration company has reversed, that is, the reverse diversion from the European style whole decoration stores to the cooperative decoration enterprises. We think this shows that the company has begun to enter the second stage in the promotion of the whole decoration large home business: from seeking front-end traffic cooperation to actively controlling the front-end traffic.
We expect that from 2022 to 2023, the company’s packaged business is expected to enter the speed-up track again and become a heavy weapon for the company to seize the share of the household industry in the next stage.
The industry boom is expected to pick up, and the company’s valuation is at the bottom, maintaining the “buy” rating: we expect the company’s EPS from 2022 to 2024 to be 5.07/5.94/7.03 yuan respectively, and the current share price corresponding to PE is 24 / 20 / 17 times respectively. At present, the overall valuation of China’s home furnishing sector is at the bottom. 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 furnishing industry rise and improve the valuation level of the industry. As a customized head company, the company has good growth prospects. At the same time, the current valuation level is low and maintains 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.
