Chenguang Co., Ltd. ( Shanghai M&G Stationery Inc(603899) )
Events
On April 28, the company released its first quarterly report. 1q22 achieved a revenue of 4.23 billion yuan, a year-on-year increase of + 10.9%; The net profit attributable to the parent company was 276 million yuan, a year-on-year increase of – 16.04%; The net profit deducted from non parent company was 256 million yuan, a year-on-year increase of – 13.34%, and the overall performance was in line with expectations.
Business analysis
Traditional business: 1q is under pressure due to the disturbance of the epidemic, and the gross profit margin is up year-on-year. 1q22’s traditional core business achieved a revenue of 1.7 billion yuan (excluding klip, retail stores and Chenguang Technology), a year-on-year increase of – 14.8%, mainly due to the aggravation of the epidemic in many places since March, affecting the passenger flow of school side stores. Category: category optimization promotes the rise of gross profit margin, including the revenue of writing instruments of 499 million yuan (- 25.4%), and the gross profit margin of 40.4% (+ 1.29pct); The revenue of student stationery is 718 million yuan (- 6.7%), and the gross profit margin is 33.4% (+ 1.11pct); The revenue of office stationery is 730 million yuan (- 7.18%), and the gross profit margin is 29.2% (+ 1.08pct).
Klip’s revenue performance exceeded expectations, and large retail stores grew steadily. 1) Klip: 1q’s revenue was 2.146 billion yuan (+ 46.4%), and its gross profit margin was 9.3% (YoY – 1.2pct, mom + 0.23pct), which was mainly affected by the change of product structure and service mode. 2) Large retail stores: 1q22 large retail stores have a revenue of 265 million yuan (+ 9%); The revenue of Jiumu / living hall is 2.43 (+ 9.9%) / 22 million yuan (+ 0.1%). As of 1q22, there were 532 large retail stores, including 472 Jiumu stores (321 Direct stores + 151 franchisees), with a net increase of 9 stores in a single quarter. 3) Chenguang Technology: the revenue is 118 million yuan (+ 9.47%), and the overall online growth rate is expected to be better than the industry market.
Affected by the change of business structure, the net interest rate was -1.9pct year-on-year. The gross profit ratio of R & D expenses was -1.6 PCT / – 6pct, which was lower than that of -0.7 PCT / – 1PCT, respectively.
With the improvement of the epidemic situation, the traditional business is expected to be repaired, and the growth momentum of medium and high-end &2b business is sufficient. With the epidemic control and repair, the company’s production and operation is expected to enter the repair period, which is expected to return to the growth of traditional business through multi-channel force and category expansion. The medium and high-end upgrading of product price belt is also expected to improve the profitability, and the large retail stores are expected to accelerate the exhibition of stores. The office centralized purchase space is vast, and the business scale and profit margin have room to improve.
Profit adjustment and investment suggestions
The company has a deep moat and sufficient growth momentum of new business. It is estimated that the company’s EPS in 22-24 years will be 1.87, 2.3 and 2.76 yuan respectively, and the current share price corresponding to PE is 26, 21 and 17 times respectively, maintaining the “buy” rating.
Risk tips
The growth rate of traditional business is lower than expected; The epidemic continues to affect passenger flow for a long time; New business expansion was lower than expected.
