Chenguang Co., Ltd. ( Shanghai M&G Stationery Inc(603899) )
Event: the company released the first quarterly report of 2022. In 2022q1, the company achieved a revenue of 4.229 billion yuan, an increase of 10.93% at the same time; The net profit attributable to the parent company was 276 million yuan, with a decrease of 16.04%; The non net profit deducted was 256 million yuan, a decrease of 13.34%. With the steady growth of Q1, the revenue is in line with the expected high performance base.
The business structure affects the apparent profit margin and the operating efficiency continues to improve. 1) In terms of profitability, 2022q1 company achieved a gross profit margin of 21.71% (- 2.92pct.), The net interest rate attributable to the parent company is 6.52% (-2.09pct.). The profit margin declined slightly, mainly due to the increase in the proportion of Chenguang kelipu’s business revenue with relatively low gross profit margin. 2) In terms of period expenses, the sales expense rate of 2022q1 company is 8.08% (-0.68pct.); The rate of administrative expenses is 4.21% (-0.57 PCT.); The R & D expense rate is 1.07% (-0.17pct.); Financial expense rate -0.09% (-0.10pct.), Improve business efficiency under fine management.
From the perspective of business model: traditional retail is subject to short-term adjustment affected by the epidemic, and new business drives growth.
1) traditional core business: offline adjustment and online stability. We estimate that the company’s traditional offline retail 22q1 revenue is 1.7 billion yuan (- 14.9%), and the traditional business is under short-term pressure due to the impact of the epidemic, which does not change the company’s long-term competitiveness. The company focuses on key terminals, promotes the improvement of single store quality, and alliance app enabled terminals to help improve retail capacity. Chenguang technology 22q1 achieved revenue of 118 million yuan (+ 9.47%). The company continues to develop new e-commerce channels and promote refined member management. The number of members of tmall official flag exceeds one million. The company continues to promote the layout of all channels and multi contacts, improve the retail service ability, stabilize the core barriers of products, brands and channels, and firmly look at the medium-term growth under strong operation ability.
2) new business: the revenue was 2.411 billion yuan, a year-on-year increase of 41.1%. Among them, the office direct sales business achieved a revenue of 2.146 billion yuan (+ 46.4%). The company’s new and old customers have expanded MRO and new marketing categories, and the influence of office direct selling brand has been further improved. The business of large retail stores realized an operating revenue of 265 million yuan (+ 9.02%); Among them, the revenue of Jiumu sundries club was 243 million yuan, an increase of 9.9%. By the end of 22q1, the company had 532 large retail stores (compared with the beginning of the year + 9), including 60 Chenguang living halls and 472 Jiumu sundries clubs (321 directly operated, 151 franchised and 9 newly added Jiumu sundries clubs compared with the beginning of the year). Keli popularized the business of large retail stores, successfully took over the traditional core business and became the main growth driver of the company. It is optimistic about the performance after the model runs through.
By product: the product structure has been continuously optimized, and the gross profit margin has improved year-on-year. 1) Writing instruments: the revenue is 499 million yuan (- 25.4%), and the gross profit margin is 40.4% (+ 1.29 PCT.). 2) Student stationery: the revenue is 719 million yuan (- 6.69%), and the gross profit margin is 33.42% (+ 1.11pct.). 3) Office stationery: the revenue is 730 million yuan (- 7.18%), and the gross profit margin is 29.24% (+ 1.08 PCT.). 4) Other stationery: the revenue is 133 million yuan (+ 14.48%), and the gross profit margin is 46.56% (+ 1.83pct.), The development of Jiumu sundry Club drives the rapid and large-scale development of other stationery. 5) Office direct sales: the revenue is 2.146 billion yuan (+ 46.40%), and the gross profit margin is 9.30% (- 1.20 PCT.).
Promote the strategy of one body and two wings, and be optimistic about the long-term growth of the company. The company’s traditional core business has developed steadily, with the continuous promotion of one body and two wings. With the continuous optimization of the company’s product structure and the continuous improvement of channel construction, the company has actively explored overseas markets, moved forward towards the vision of “world-class dawn”, and has abundant long-term growth momentum.
Investment suggestion: as the leader of stationery, Chenguang is optimistic about the long-term and steady development of the company, driven by traditional core business and new business. We expect the company to achieve operating revenue of RMB 21.64 billion, 26.27 billion and 23.52 billion from 2022 to 2024, with a year-on-year increase of 22.9%, 21.4% and 20.0%, and the net profit attributable to the parent company of RMB 1.836 billion, 2.190 billion and 2.578 billion, with a year-on-year increase of 21.0%, 19.3% and 17.7%, maintaining the “buy” rating.
Risk tip: the risk of new business expansion is less than expected, the risk of intensified competition in the stationery industry, the risk of fiscal policy, and the risk of repeated epidemics.
