\u3000\u3 Shengda Resources Co.Ltd(000603) 868 Shanghai Flyco Electrical Appliance Co.Ltd(603868) )
Event:
The company released the 2021 annual report and the first quarterly report of 2022: in 2021, the company realized an operating revenue of 4.005 billion yuan, yoy + 12%; The net profit attributable to the parent company was 641 million yuan, yoy + 0.4%. 4q21 achieved an operating revenue of 1.142 billion yuan, yoy + 7%; The net profit attributable to the parent company was 138 million yuan, yoy-18%. 1q22 company achieved operating revenue of 1.12 billion yuan, yoy + 28%; The net profit attributable to the parent company was 237 million yuan, yoy + 59%. The profit distribution plan is to pay out 10 yuan (including tax) for every 10 shares, and the cash dividend rate is 68%.
Comments:
The razor business structure has been upgraded rapidly, the channel reform has been deepened, and the efficiency has been improved. In terms of products, in 2021, the revenue of personal care appliances / household appliances / electrical appliances was RMB 3.7 billion / 1.8 billion / 30 million respectively (YoY + 11% / + 23% / – 24%), of which the gross profit margin of personal care appliances increased by 11 percentage points year-on-year; The company continued to promote the innovation, R & D and high-end upgrading of razor business. In 2021, the relevant business achieved a revenue of 2.78 billion yuan (YoY + 21%). The market feedback of new inductive “star sky razor” and portable “space flying saucer razor” was positive, the proportion of new medium and high-end razor sales increased to 20%, and the average razor sales price increased by 25% year-on-year; In 2021, the revenue of hair dryer / electric toothbrush was 520 / 60 million yuan (yoy-9% / + 2255%), and the electric toothbrush business gradually showed scale effect. In terms of sub brands, the company continues to strengthen the block management of dual brands: 1) the revenue generating ability of “Borui” brand at the cost performance end continues to be optimized, and gradually realizes the market undertaking of the bottom products of “Feike” brand; 2) Benefiting from the step-by-step price increase, the upgrading effect of medium and high-end “Feike” brand is remarkable. In terms of channels, the company deepened the reform of the “online C-end + offline direct supply” channel model: 1) online through the in-depth cooperation of mainstream e-commerce platforms and content social platforms to realize multi-dimensional brand marketing, continuously enhance the self-supporting capacity, and drive the improvement of the company’s brand strength and product structure; 2) Offline constantly promote the “direct supply” of Ka stores + the “refinement” of regional distribution, further improve the efficiency of channel flattening and grid management, and broaden the sales penetration of cities, townships and counties, so as to improve the terminal control of large, medium and small businesses.
The gross profit margin was greatly optimized and the sales expense rate increased significantly. In 2021, the company’s gross profit margin was 47.03% (YoY + 6pcts) and that of 1q22 was 54.07% (YoY + 10pcts). The continuous improvement of gross profit margin was due to the increase of average product price and the upgrading of product structure. From the perspective of cost investment, the sales cost rate of 2021 / 1q22 was yoy + 7pcts / + 5pcts respectively. The company continued to increase investment in the development of self operated e-commerce and the promotion of content social platforms; The R & D expense rate reached 3.3% (YoY + 1pcts) in 2021, mainly because the company increased the R & D investment of new razors in 2021, and the R & D expense rate of 1q22 was the same as that of the same period last year; The management expense ratio of 2021 / 1q22 is 4.0% / 3.2% (YoY + 0.2pcts / – 0.5pcts). 1q22’s net profit margin was 21.1% (16.0% in 2021), up 4 percentage points year-on-year. In terms of assets and liabilities, as of 1q22, the company has its own cash of 1.1 billion yuan, accounting for 28% of the company’s total assets, and the operating liquidity is fully guaranteed. In terms of cash flow, the company generated an operating cash flow of 740 million yuan (yoy-24%) in 2021, which was mainly due to the increase in product publicity expenses of content social platforms.
Profit forecast, valuation and rating: optimistic about the leading position of the company’s personal care small household appliances, and raised to the “buy” rating. The company’s dual brand drive has made steady efforts, online multi-dimensional promotion + offline channel reform has continuously promoted the growth of revenue and profit, upgraded the structure and average price of razor products, optimized the overall gross profit margin, and there is potential space for overseas market development. We are optimistic about the long-term development of the company. We raised the net profit attributable to the parent company in Shanghai Flyco Electrical Appliance Co.Ltd(603868) 2022-23 to 920 million yuan and 1.03 billion yuan (up 28% and 32% respectively compared with the previous time), and increased the profit forecast for 2024 to 1.14 billion yuan, corresponding to 26, 23 and 21 times of PE respectively. In view of the rationalization of the company’s channels + the improvement of product structure, and the performance of 22q1 significantly exceeded expectations, the company was raised to the “buy” rating.
Risk tip: the cost of raw materials has risen sharply, the expansion of new categories is less than expected, and the space for product price increase is limited.
