\u3000\u3 Shengda Resources Co.Ltd(000603) 868 Shanghai Flyco Electrical Appliance Co.Ltd(603868) )
Event:
On April 27, 2022, Shanghai Flyco Electrical Appliance Co.Ltd(603868) released the annual report of 2021 and the first quarterly report of 2022. In 2021, the company achieved a revenue of 4.005 billion yuan (+ 12.26%) and a net profit attributable to the parent company of 641 million yuan (+ 0.38%). In 2021q4, the company achieved a revenue of 142 million yuan (+ 7.42%), and a net profit attributable to the parent company of 138 million yuan (- 17.57%). In 2022q1, the company realized a revenue of 1.12 billion yuan (+ 27.54%), and a net profit attributable to the parent company of 237 million yuan (+ 59.10%).
Key investment points:
Personal care and household appliances grew steadily, and direct sales grew rapidly. 1) By products, in 2021, the company realized the revenue of personal care electrical products of 3.699 billion yuan (+ 11.24%), the revenue of household electrical products of 178 million yuan (+ 23.06%), and the revenue of electrical products of 27 million yuan (- 23.67%). 2) By sales mode, in 2021, the company achieved direct sales revenue of 1.532 billion yuan (+ 285.43%) and distribution revenue of 2.463 billion yuan (- 22.19%). The high growth rate of direct sales is mainly due to the company’s efforts to develop new marketing such as self operated e-commerce, content social marketing and brand self broadcasting.
In 2022q1, the gross profit margin and net profit margin attributable to the parent company increased steadily. 1) Gross profit margin: the gross profit margin of 2021q4 / 2022q1 was 46.73% / 54.07%, with a year-on-year increase of + 9.48% / + 9.91%, which was mainly due to the increase in the proportion of sales of medium and high-end new products. 2) Net profit margin attributable to parent: the net profit margin attributable to parent in 2021q4 / 2022q1 was 12.07% / 21.14%, with a year-on-year increase of – 3.66% / + 4.19%. Thanks to the increase of gross profit margin, the net profit margin attributable to parent in 2022q1 increased significantly month on month. 3) Expense ratio: the 2021q4 sales / management / R & D expense ratio was 20.18% / 5.83% / 3.97%, with a year-on-year increase of + 10.80pct / + 1.79pct / + 1.92pct, and the 2022q1 sales / management / R & D expense ratio was 21.15% / 3.18% / 2.01%, with a year-on-year increase of + 5.16pct / – 0.54pct / + 0.04pct. The increase in the sales expense ratio was mainly due to the increase in personnel and advertising expenses caused by the company’s establishment of online team and strengthening brand publicity.
Optimize the brand strategy and upgrade the medium and high-end product structure. The company promotes the rejuvenation and high-end upgrading of “Feike” brand, and “Borui” brand undertakes the original cost-effective market of “Feike”. In 2021, the company launched innovative new products such as inductive “star shaver” and portable “space UFO shaver”, and the product structure continued to upgrade. From January to February in 2021 / 2022, the sales of new high-end razors accounted for 20.32% / about 43.2%, and the average price of razor products increased by 25.23% / about 47.6% compared with 2020 / 2021.
Continue to deepen the reform of channels. 1) Online: the company has set up an online operation team to develop self operated e-commerce. By the end of 2021, 19 sales subsidiaries of home appliance manufacturers have been established. The company promoted cooperation with social platforms such as Weibo, xiaohongshu, and station B to build a blue V multi account live broadcast team in the Tiktok channel. During the father’s day, 618, Tanabata and other festivals in 2021, the company ranked first in the brand and category list in Tiktok, and the brand self broadcast operation performed well. 2) Offline: the company promotes the direct supply sales mode in the Ka channel, divides the country into five regions in the distribution channel, carries out flat and grid management, improves the sales network and strengthens the management and control ability of terminal channels.
Investment suggestion: the company is a leading enterprise in China’s personal care appliances. The upgrading of medium and high-end product structure + Wuxi Online Offline Communication Information Technology Co.Ltd(300959) channel reform is deepened, which helps the company’s revenue growth, continuously enhances its profitability, and gives it a “buy” rating for the first time. We predict that from 2022 to 2024, the company’s net profit attributable to the parent company will be RMB 1.019/12.51/1.461 billion, the corresponding EPS will be RMB 2.34/2.87/3.35, and the current share price will be 21.22/17.30/14.80 times that of PE.
Risk tips: intensified market competition, price fluctuation of raw materials, repeated covid-19 epidemic, less than expected upgrading of product structure, less than expected promotion of channel reform, etc.
