Chenguang Co., Ltd. ( Shanghai M&G Stationery Inc(603899) )
Matters:
Company announcement: on April 28, 2022, the company released its first quarterly report. The revenue in the first quarter of 2022 was 4.23 billion yuan, a year-on-year increase of 10.9%; The net profit attributable to the parent company was 280 million yuan, a year-on-year decrease of 16.0%; The net profit attributable to the parent company after deduction was 260 million yuan, a year-on-year decrease of 13.3%.
Guoxin textile and clothing view: 1) in the first quarter, the revenue increased by 10.9%, the writing instruments were mainly produced in Shanghai, which had a great impact, and klip maintained rapid growth; 2) It is expected to make up for some losses after the epidemic eased, and the short-term disturbance will not hinder the solid progress of the new five-year plan; 3) Risk warning: the epidemic situation repeatedly affects production and operation; Consumer demand fell sharply; Intensified market competition; 4) Investment suggestion: the epidemic and Force Majeure will not hinder the company's core competitiveness. We are optimistic about the layout opportunity after the valuation correction. The epidemic situation in Shanghai and other places has a significant impact on the company's production and operation. In the future, with the easing of the epidemic situation, the short-term adverse factors will dissipate, and the inflection point of the company's performance can be expected; In the long run, the company's traditional core business has significant brand advantages, smooth promotion of high-end products, deep channel barriers, and has long-term sustainable growth momentum; New business retail stores go hand in hand with klip, showing high-quality and rapid development. Based on the impact of the epidemic on the performance, we slightly lowered the profit forecast. It is estimated that the net profit of the company from 2022 to 2024 will be RMB 1.77/22.0/2.65 billion respectively (originally RMB 1.89/22.7/2.72 billion), with a year-on-year increase of 16.3% / 24.8% / 20.5% respectively, EPS of RMB 1.9/2.37/2.86 respectively, and the current share price corresponding to PE is 25.3x/20.2x/16.8x. We are optimistic about the long-term high-quality growth of the company, and the short-term disturbance of force majeure brings good allocation opportunities, Maintain a reasonable valuation corresponding to 2023 PE 32-33x, with a reasonable valuation range of 76-78 yuan, and maintain the "buy" rating.
Comments:
In the first quarter, the revenue increased by 10.9%. Writing instruments were mainly produced in Shanghai, which had a great impact, and klip maintained rapid growth
The company's revenue in the first quarter of 2022 was 4.23 billion yuan, a year-on-year increase of 10.9%; The net profit attributable to the parent company was 280 million yuan, a year-on-year decrease of 16.0%. Income and profits have been affected by the epidemic in Shanghai and other places since March.
In terms of revenue by product, office direct sales increased rapidly, and writing tools, student stationery and office stationery decreased. The income of writing instruments was 500 million yuan, a year-on-year decrease of 25.4%; Student stationery income was 720 million yuan, a year-on-year decrease of 6.7%; The income of office stationery was 730 million yuan, a year-on-year decrease of 7.2%; The income from other products was 130 million yuan, a year-on-year increase of 14.5%; Office direct sales revenue was 2.15 billion yuan, a year-on-year increase of 46.4%.
In terms of revenue by business, the growth of klip is strong, the growth of large retail stores slows down, and the traditional core business has declined. Klip's revenue was 2.15 billion yuan, a year-on-year increase of 46.4%, continuing its strong growth momentum; The business income of large retail stores was 270 million yuan, with a year-on-year increase of 9.0%, of which Jiumu's income was 240 million yuan, with a year-on-year increase of 9.9%. The impact of the epidemic on retail business is reflected; Traditional core business income is expected to decline in double digits, which is greatly affected by the closure and control of the epidemic in Shanghai.
The increase in the proportion of office supplies led to a decline in the comprehensive gross profit margin and a decline in the expense rate. The gross profit margin in the first quarter was 21.7%, a year-on-year decrease of 2.9 percentage points, mainly due to the increase in the proportion of office direct sales and the decline of gross profit margin; The operating profit margin was 8.4%, a year-on-year decrease of 1.8 percentage points; The net interest rate was 6.8%, a year-on-year decrease of 1.9 percentage points. The sales expense ratio was 8.1%, a year-on-year decrease of 0.7 percentage points; The rate of administrative expenses was 4.3%, a year-on-year decrease of 0.6 percentage points; The financial expense ratio was - 0.1%, a year-on-year decrease of 0.1 percentage points, mainly due to the increase of interest income and the decrease of exchange losses; The R & D expense rate was 1.1%, a year-on-year decrease of 0.2 percentage points.
In terms of gross profit margin by product, the gross profit margin of all products except office direct sales increased slightly. The gross profit margin of writing instruments was 40.5%, with a year-on-year increase of 1.3 percentage points; The gross profit margin of student stationery was 33.4%, with a year-on-year increase of 1.1 percentage points; Office stationery was 29.2%, with a year-on-year increase of 1.1 percentage points; The gross profit margin of other products was 46.6%, with a year-on-year increase of 1.8 percentage points; The gross profit margin of office direct selling was 9.3%, a year-on-year decrease of 1.2 percentage points.
Roe decreased and turnover maintained a rapid level. The company's annual roe was 17.4%, down 7.0 percentage points year-on-year. The turnover days of current assets maintained a rapid level. The turnover days of inventory / accounts receivable / accounts payable were 42 / 41 / 71 days respectively, with a year-on-year increase of 1 day / increase of 2 days / decrease of 2 days respectively.
It is expected to make up for some losses after the epidemic eased, and the short-term disturbance will not hinder the solid progress of the new five-year plan
In the first quarter of 2022, the company's performance was under short-term pressure under the influence of the epidemic. With the epidemic ushering in an inflection point, the resumption of work and production is expected to make up for some production and sales. In the opening year of the new five-year strategy, the company's traditional business has been driven by high-end products and channel transformation, and the new business model has a clear trend of running through and upgrading. Specifically:
Maintain the company's business growth target of 10% - 15% in the medium term. Despite the impact of double reduction policy and epidemic situation, China's consumption upgrading will strongly promote the demand for medium and high-end stationery, and the market scale of stationery industry still has more room for growth. In 2021, the company continued to reform its products and channels, and its business strength was enhanced. On the product side, the company combines MBS method to optimize new product development, shorten product development cycle, develop high-end new products and increase the proportion of high-quality cultural and creative products; On the channel side, the company has deep channel barriers, continues to upgrade and Reform in line with consumer needs, changes from wholesalers to brand retail service providers, adjusts product structure and helps terminal sales. In the medium term, the general trend of consumption upgrading in China is still established. The company has strong competitive advantages in products, channels and teams. Even if the income growth rate of traditional core business fluctuates in the short term, it is expected that the traditional core business is expected to achieve an annual growth of 10% ~ 15% in the medium term.
In terms of retail stores, Jiumu sundries agency has grown rapidly, driving the upgrading of Chenguang brand and products. In June 2021, Chenguang living hall (of Jiumu sundries Club) will become a wholly-owned subsidiary of the company, and Jiumu sundries club will become the bridgehead of Chenguang brand and product upgrading. In the first quarter of 2022, Chenguang living hall (including Jiumu debris agency) achieved an operating revenue of 270 million yuan, an increase of 9.0% year-on-year under the epidemic situation and high base, of which Jiumu debris agency achieved an operating revenue of 950 million yuan, an increase of 70% year-on-year. By the end of the first quarter of 2022, the number of large retail stores in China was 532, including 60 Chenguang life hall and 472 Jiumu sundry Club (321 directly operated and 151 franchised).
Jiumu's business model is gradually running through. In the medium term, it is expected to add 100 stores every year, of which more than 100 stores will be opened in 2022.
In terms of klip, the improvement trend of operating capacity and profit margin is clear, and it is expected to achieve strong growth. In the first quarter of 2022, the operating revenue of Chenguang kelipu was 2.15 billion yuan, with a year-on-year increase of 46.4%. Klip adopts new technical means to improve efficiency, which is expected to continue to promote business growth and net profit margin. In the assessment of key customers; In terms of procurement, with the increase of procurement depth, the bargaining power of key categories has also improved. In the medium term, klip is expected to achieve sustained and strong growth on the revenue side and continuous improvement on the profit side; On the premise that the epidemic situation returns to normal, klipp aims to achieve a revenue scale of more than 10 billion in 2022 and a sales revenue of 20 billion in 2025.
Investment suggestion: the epidemic and Force Majeure will not hinder the company's core competitiveness. We are optimistic about the layout opportunity after the valuation correction
The epidemic situation in Shanghai and other places has a more obvious impact on the company's production and operation. In the future, with the easing of the epidemic situation, the short-term adverse factors will dissipate, and the inflection point of the company's performance can be expected; In the long run, the company's traditional core business has significant brand advantages, smooth promotion of high-end products, deep channel barriers, and has long-term sustainable growth momentum; New business retail stores go hand in hand with klip, showing high-quality and rapid development. Based on the impact of the epidemic on the performance, we slightly lowered the profit forecast. It is estimated that the net profit of the company from 2022 to 2024 will be 1.77/22/2.65 billion yuan respectively (originally 1.89/22.7/2.72 billion yuan), with a year-on-year increase of 16.3% / 24.8% / 20.5% respectively, EPS of 1.9/2.37/2.86 yuan respectively, and the current share price corresponding to PE is 25.3x/20.2x/16.8x. We are optimistic about the long-term high-quality growth of the company, and the short-term disturbance of force majeure brings good allocation opportunities, Maintain a reasonable valuation corresponding to 2023 PE 32-33x, with a reasonable valuation range of 76-78 yuan, and maintain the "buy" rating.
Risk tips
The epidemic situation repeatedly affects production and operation; Consumer demand fell sharply; Market competition intensifies.
