\u3000\u3 Shengda Resources Co.Ltd(000603) 365 Shanghai Shuixing Home Textile Co.Ltd(603365) )
The company released its 2021 annual report & the first quarterly report of 2022: 1) in 2021, the revenue was 3.799 billion yuan / year-on-year + 25.19%, and the net profit was 386 million yuan / year-on-year + 40.55%, which exceeded our previous expectations. Quarter by quarter, the revenue of 21q1-q4 increased by 49.1% / 31.5% / 11.8% / 20.0% year-on-year respectively, and the net profit attributable to the parent company increased by 91.1% / 58.1% / 10.2% / 33.9% year-on-year respectively. Under the interference of the epidemic in the middle of 2021, Q4 gave full play to the advantages of e-commerce and driven the confidence of offline channels, and its performance was significantly improved compared with Q3. 2) In 2022q1, the revenue / net profit increased by 12.32% / 7.36% to 806 million / 84.69 million yuan respectively.
Online advantages continued and direct sales increased. In 2021, the revenue from online / direct sales / franchising / other channels was + 30.1% / 31.7% / 19.7% / 1.2% year-on-year, accounting for 51.7% / 7.4% / 39.1% / 1.7% respectively, realizing the growth of all channels. 1) Online: the first mover advantage continues to appear, and cross-border cooperation further improves brand awareness. In the past 21 years, the company cooperated with the ice cream brand Zhong Xuegao to launch “ice cream quilt” and jointly launched national style products with Dunhuang museum to further enhance the brand awareness. In 21 years, “618” tmall ranked first in terms of sales of home textile brands, and in 16-21 years, tmall’s “double 11” activities continuously ranked first in terms of sales of single home textile brands. In 21 years, the sales revenue of tmall, jd.com and vipshop accounted for about 90% of the online channels. On the basis of the rapid growth of the three platforms, the company also focused on the layout of new social e-commerce channels such as Tiktok and Kwai. 2) Offline: in terms of channel structure, in the early years, the company focused on distribution channels. In recent years, the company has made great efforts in direct channels, opened direct stores in many provincial capitals, increased the proportion of direct sales and improved the channel structure. In 21 years, the net number of Direct stores increased by 30-40, and the number of distribution stores was basically the same year-on-year. We expect that this trend is expected to continue with the continuous promotion and laying of direct channels. In terms of store construction, the company increased the display area of core products, improved the store image, promoted the business model of cloud store applet, live broadcast and private domain traffic under the repeated epidemic environment, and improved the sales conversion rate. 21q4’s popular product, 3D goose down, sold more than 60000 pieces and sold more than 100 million yuan.
Profitability continued to rise and inventory turnover was healthy. 1) Gross profit margin: in 2021, the gross profit margin increased from + 2.68pct to 37.95% year-on-year, mainly driven by the optimization of product structure and the increase of the proportion of direct sales with high gross profit. In terms of channels, the gross profit margin of online / direct / franchise / other channels increased from + 0.08 / – 0.43 / + 6.26 / + 1.9pct to 36.18% / 57.72% / 37.09% / 29.63% respectively year-on-year. The gross profit margin of franchise channels increased more, mainly due to the introduction of dealer support policies in 20 years, which lowered the gross profit margin and superimposed the optimization of sales product structure in 21 years. 22q1 gross profit margin continued to increase, year-on-year + 0.95pct to 38.14%. 2) Expense rate: during the 21-year period, the expense rate increased from + 0.09pct to 25.28% year-on-year, of which the sales / management / R & D / financial expense rate increased from + 1.12 / – 0.74 / – 0.39 / + 0.11pct to 19.85% / 4% / 1.72% / – 0.29% year-on-year respectively. The increase of advertising and employee compensation expenses led to the increase of sales expense rate. During 22q1, the expense rate increased from + 2.33pct to 28.04% year-on-year. 3) Inventory: by the end of year 21 / 22q1, the inventory had increased by + 26.95% / + 8.53% to 931 / 946 million yuan respectively year-on-year, and the inventory turnover days were – 17 / + 9 days to 127 / 169 days respectively year-on-year. The inventory turnover maintained a healthy level. 4) Cash: the net cash flow from operating activities in 21 years increased by 22.66% year-on-year to RMB 464 million, and the net cash outflow from operating activities in 22q1 was RMB 72.01 million, mainly due to seasonal factors (the company usually gives credit to dealers in Q1 and centralized collection in Q4). As of the end of year 21 / 22q1, the funds in the account had increased by 15.35% / 29.3% year-on-year to RMB 1.171939 billion respectively.
Profit forecast and investment rating: the company is the leader of China’s home textile industry. It has outstanding online advantages and focuses on core products. In recent two years, it has shown strong toughness in performance. In 21 years, it has continued to optimize in the fields of brand, R & D, products, channels, digitization, talent construction and so on. Its performance has exceeded the expected growth. 22q1 still achieved growth under the influence of local epidemic. Since the end of March, the company has made positive adjustments in warehousing and logistics, which is expected to reduce the impact of the epidemic. We have reduced the year-on-year growth rate of net profit in 2022 from 14.2% to 11.6%. It is expected that the year-on-year growth rate in 202324 will be 15.4% / 14.8% respectively, and the EPS in 22-24 will be 1.61/1.86/2.14 yuan / share respectively, corresponding to pe9 / 8 / 7X, maintaining the “buy” rating.
Risk tips: the epidemic situation worsens, the economy is weak, and the expansion of stores is less than expected.
