Chenguang Co., Ltd. ( Shanghai M&G Stationery Inc(603899) )
Key investment points
Event: Chenguang shares realized a revenue of 4.229 billion yuan in 2022q1, a year-on-year increase of 10.93%; The year-on-year net profit attributable to the parent company was -76.04 billion yuan; The non net profit deducted was 256 million yuan, a year-on-year increase of – 13.34%.
The gross profit margin of traditional business increased slightly and the overall rate decreased slightly. Gross profit margin: the gross profit margin of 2022q1 company is 21.71%, with a year-on-year increase of -2.92pct. From the perspective of products, the gross profit margin of writing instruments / student stationery / office stationery / office direct sales is 40.40% / 33.42% / 29.24% / 9.30% respectively, with a year-on-year increase of 1.29pct/1.11pct/1.08pct / – 1.20pct. With the reduction of SKU volume and quality, the gross profit margin of traditional business has increased, and the gross profit margin of kelip at 2B end has decreased slightly. Expense side: in 2022q1, the company’s sales expense rate / management expense rate / financial expense rate / R & D expense rate were 8.08% / 4.31% / – 0.09% / 1.07% respectively, with a year-on-year increase of -0.68pct / – 0.58pct / – 0.10pct / – 0.17pct. The company’s cost reduction effect was remarkable, and the R & D investment remained stable.
Traditional business: reduce the quantity and improve the quality of product SKU, diversify the layout of channels, and continuously expand the brand territory. Product end: in 2022q1, the revenue of writing instruments / student stationery / office stationery was 499 / 719 / 730 million yuan respectively, with a year-on-year increase of – 25.37% / – 6.69% / – 7.18%, accounting for 11.81% / 16.99% / 17.27% of the revenue, and a year-on-year increase of – 5.74pct / – 3.21pct / – 3.37pct. In the first quarter, due to the repeated impact of the epidemic in some regions, the traditional business declined, and the sales of writing instruments were greatly affected; Channel side: gradually transform from wholesaler to brand retail service provider, multi-point layout and all channel operation. Fine management of offline channels has been realized. Chenguang alliance app has expanded its stores to serve more than 100000 terminal stores and established an automatic replenishment mechanism for channels; Continue to promote new channel businesses such as pinduoduo, Tiktok and Kwai online. According to the company’s announcement, online sales accounted for more than 25% of traditional core businesses in 2021, and Chenguang technology’s revenue in 2022q1 was RMB 118million, 9.47% year-on-year.
Jiumu sundries agency: affected by the disturbance of the epidemic in the short term, the revenue of single stores has declined. In 2022q1, the large retail stores realized a revenue of 265 million yuan, a year-on-year increase of 9.02%, of which the revenue of Jiumu sundries club was 243 million yuan, a year-on-year increase of 9.90%, and the average revenue of a single store was 515100 yuan; A year-on-year decrease of 76400 yuan. As of 2022q1, there are 532 large retail stores in China, including 60 Chenguang life hall and 472 Jiumu sundry Agency (321 directly operated and 151 franchised). The short-term disturbance of 2022q1 epidemic affected the sales of offline retail stores in the first quarter. In the medium and long term, the company continues to be optimistic about retail stores to provide performance space for the company. In 2022, the company plans to add 100 + stores.
Chenguang kelipu: the business scale continues to grow rapidly, and the proportion of office direct sales business gradually increases. In 2022q1, Chenguang kelipu achieved a revenue of 2.146 billion yuan, 46.40% year-on-year, accounting for 50.74% of the revenue, with a year-on-year increase of 12.29pct. According to the company’s announcement, the performance goal of kelipu in 2022 is to reach 10 billion revenue scale, and it is expected to achieve 20 billion sales revenue in 2025. The company actively develops new categories and new business opportunities such as MRO and marketing gifts. The brand influence of office direct sales market continues to improve, and the development space of office direct sales is broad.
Profit forecast and investment suggestions: on the traditional business side, R & D investment drives product upgrading, high-quality cultural and creative products increase product premium, and the gross profit margin of writing tools, student stationery and office stationery in 2022q1 has increased. The high-end stationery may open up profit space; At the office direct selling end, the one-stop service of office supplies, marketing gifts and MRO continue to develop, and the rapid growth of klip business is expected to improve the company’s valuation; At the end of large retail stores, the number of stores of Jiumu sundries agency continues to expand, and the epidemic may be disturbed in the short term. It is optimistic about the improvement of the operation capacity of a single store in the long term, so as to provide a new increment of performance for the company; On the online sales side, the company’s five-year strategy focuses on increasing the proportion of online sales. Chenguang technology’s 2022q1 revenue has increased steadily, and the company’s performance is expected to grow further. The company’s Chenguang kelipu maintains rapid growth, and the large retail stores have revenue growth potential. Based on the company’s leading position in stationery and broad overseas market space, a certain valuation premium is given. It is estimated that from 2022 to 2024, the company will realize operating revenue of RMB 213.152598230625 billion, a year-on-year increase of + 21.1% / 21.9% / 17.9%; The net profit attributable to the parent company is expected to be RMB 1.731/2.146/2.509 billion, with a year-on-year increase of 14.1% / 24.0% / 16.9%; EPS is expected to be 1.87/2.31/2.70 yuan respectively, and the corresponding PE valuation is 25.6x/20.7x/17.7x respectively, maintaining the “buy” rating.
Risk warning: repeated epidemic situation; Rising cost of raw materials; The birth rate has declined; Continuous academic burden reduction; Electronic office trend
