\u3000\u3 Shengda Resources Co.Ltd(000603) 365 Shanghai Shuixing Home Textile Co.Ltd(603365) )
The company released 2021 annual report and 2022q1 financial report, in which the revenue / net profit attributable to parent company / net profit deducted in 2021 were 3.799/3.86/362 billion respectively, with a year-on-year increase of + 25.19% / + 40.55% / + 56.6%. Among them, Q4 achieved revenue / net profit attributable to the parent company / net profit deducted from non net profit of 1.343/1.36/132 billion respectively, with a year-on-year increase of + 19.99% / + 33.93% / + 29.99%. In 2022q1, the revenue / net profit attributable to the parent company / net profit attributable to the parent company after deduction was 806 / 0.85 / 0.67 million, with a year-on-year increase of + 12.32% / + 7.36% / – 6.15%. The decline after deduction was mainly due to the slowdown of income under the influence of the epidemic, while the sales expenses were still invested as planned. In addition, the decrease of non operating income also reduced the net profit after deduction. In addition, the company plans to distribute a cash dividend of 5 yuan (including tax) for every 10 shares, with a total cash dividend of 133 million yuan (including tax) and a dividend rate of 3.43%.
E-commerce channels continued to increase, and the operation quality of offline stores was improved. Quarter by quarter, the revenue of 21q1 ~ Q4 was + 49.3% / 31.5% / 11.7% / 20.0% year-on-year respectively. H1 achieved restorative growth, Q3 was affected by adverse factors such as repeated outbreaks and disaster factors, and Q4 still performed well in the peak season under the high base, driving the high growth of the whole year. By channel:
Online: during the period, the revenue was 1.965 billion yuan (up from + 30% / 61.3% in 2020 / 2019 respectively), accounting for + 1.93 PCTs to 51.7%, and the gross profit margin was 36.18% (+ 0.08 PCTs). In terms of sub platforms, the company still focuses on traditional e-commerce platforms. Tmall, jd.com and vipshop account for about 90% of the online revenue. We expect tmall to account for more than 50%, while jd.com has achieved rapid growth throughout the year (expected to exceed 50%) due to the company’s adjustment of corresponding team personnel; At the same time, the company focuses on the layout of new social e-commerce channels such as Tiktok and Kwai, strengthens the investment in live broadcasting business and personnel training, establishes a special live broadcasting base, and focuses on the development of self broadcasting business. Thanks to the efforts of multiple platforms, e-commerce continued to grow at a high rate throughout the year, of which the Gmv of the whole network reached 466 million yuan (+ 32.76%) in 2021, ranking first in single store and single brand of tmall home textile category for seven consecutive years.
Offline: during the period, the non e-commerce business achieved a revenue of 1.827 billion yuan (up to + 20.6% / 0.6% in 2020 / 2019 respectively), of which the franchise / direct sales revenue was 1.484279 billion yuan (up to + 19.69% / 31.74%) and the gross profit margin was 37.09% / 57.72% respectively, up to + 6.26 / – 0.43pcts respectively. Among them, the gross profit margin of franchise channels increased significantly year-on-year, mainly due to the support policies provided to franchisees under the epidemic in 2020 and more frequent promotional activities. However, in 2021, the above efforts were narrowed and the product structure was optimized. In terms of store efficiency, we expect significant improvement, which is the main driving force for offline growth. During the period, the company actively adjusted its strategy, realized the integration of Wuxi Online Offline Communication Information Technology Co.Ltd(300959) and Wuxi Online Offline Communication Information Technology Co.Ltd(300959) with each other, digitalized and improved the operation efficiency of stores. At the same time, a new retail center was established to increase the offline customer acquisition rate and improve the sales conversion rate. On the product side, the strategy of large single products has achieved remarkable results. The 3D velvet, a popular Q4 product, has achieved a sales volume of more than 60000 single products and a sales volume of more than 100 million.
With the upgrading of brand, product and channel, the profitability continues to improve. In 2021 / 22q1, the gross profit margin was 37.95% / 38.14% respectively, with a year-on-year increase of + 2.68/0.95pcts. It mainly benefits from: 1) optimizing product structure, streamlining SKUs, focusing on core products and increasing the proportion of high value-added products; 2) After the epidemic, the policies for franchisees returned to normal and the products were optimized, and the gross profit margin of franchise channels increased significantly. In the same period, the company’s sales / management / R & D / financial expense ratio was 19.85% / 4% / 1.72% / 0.29%, with a year-on-year increase of + 1.11 / – 0.74 / – 0.39 / + 0.11pcts. The increase in sales expense ratio was mainly due to the increase in advertising and publicity expenses and personnel salary expenses. The ratio of sales / management / R & D / financial expenses in 2022q1 was 22.14% / 4.57% / 1.62% / 0.3%, with a year-on-year increase of + 2.02 / + 0.17 / – 0 / + 0.14pcts. In 2021, the net interest rate increased by 1.11pcts to 10.16%, and the net interest rate of 22q1 was 10.5%, which decreased slightly compared with the same period, mainly because the terminal has been affected by the epidemic since March, and the investment related to long-term brands has not been reduced. Subsequently, with the gradual mitigation of the epidemic, the net interest rate is expected to increase steadily.
Under the epidemic situation, the inventory scale increased and the receivable turnover accelerated. At the end of 2021 / 2022q1, the company’s inventory scale was 946 / 931 million yuan (year-on-year + 26.95% / + 8.53%), which was consistent with the growth of revenue as a whole. The days of inventory turnover in the same period were – 16.8 / + 9.2 days to 127.05/169.33 days respectively. The turnover days in the accounts receivable period were – 4.1 / – 7.5 days to 23.83 / 22.5 days respectively year-on-year. During 2021 / 2022q1, the operating cash flow was RMB 464 / 72 million (year-on-year + 22.66% / – 24.12%), which was mainly due to the return of funds during the peak sales season of Q4, while Q1 resulted in capital outflow due to factors such as goods preparation.
Profit forecast and investment suggestions: in the long run, the company is one of the leaders of China’s home textile industry. The first mover advantage of e-commerce channels is obvious, and the overall cost performance advantage is prominent. Under the trend of consumption upgrading, the market share is expected to continue to increase. In the short term, the company’s online business is expected to maintain rapid growth under the three-dimensional operation structure of multi-channel, multi category and multi form, and the operation efficiency of offline business is expected to improve under the channel upgrading, data empowerment and organizational structure optimization. Since the end of March, the company has actively adjusted and reduced the impact of the epidemic. Considering that the recovery of the company is better than expected, we expect the attributable net profit in 2022 / 23 / 24 to be RMB 433 / 493 / 554 million respectively (the value before 2022 / 23 is RMB 424 / 487 million), an increase of 12.3% / 13.6% / 12.4% respectively. The corresponding valuation of the current price is 9 / 8 / 7 times, maintaining the “buy” rating.
Risk tip: the industry demand is less than expected; The franchise business is less than expected; The expansion of direct business is less than expected; The growth rate and gross profit margin of e-commerce were lower than expected.
