\u3000\u3 Shengda Resources Co.Ltd(000603) 313 Healthcare Co.Ltd(603313) )
Event:
The company released the 2021 annual report and the first quarterly report of 2022. The revenue / net profit attributable to the parent company in 2021 were 8.14 / – 280 million yuan respectively, with a year-on-year increase of + 24.6% / – 172.8% respectively; 4q2021 achieved revenue / net profit attributable to the parent company of RMB 2.029 / – 95 million respectively, with a year-on-year increase of + 1.3% / – 388.9% respectively. 1q2022 achieved revenue / net profit attributable to the parent company / net profit deducted from non attributable to the parent company of RMB 2.14/0.3/0.3 billion respectively, with a year-on-year increase of + 13.5% / – 44.2% / + 48.1% respectively.
Comments:
The production capacity of the United States continues to climb, and China’s independent brands are growing steadily: in 2021, the company’s domestic and export sales revenue were 1.19/6.73 billion yuan respectively, a year-on-year increase of + 46.5% / + 21.3%. In China, Healthcare Co.Ltd(603313) independent brands achieved revenue of 712 million yuan, a year-on-year increase of + 43.5%. Further subdivided Healthcare Co.Ltd(603313) independent brands, and realized revenue of 77 / 246 / 157 / 184 million yuan for direct sales / distribution / online / hotel respectively, with a year-on-year increase of + 38.0% / + 87.6% / + 38.7% / + 30.0% respectively. Langlefu brand acquired by the company achieved a revenue of 170 million yuan, a year-on-year increase of + 30.5%. For the overseas part, in terms of subregions, North America / Europe achieved revenue of RMB 4.89/1.71 billion respectively, a year-on-year increase of + 29.4% / + 16.6%; In terms of business, overseas direct sales / online / OEM achieved revenue of RMB 2.31/2.6/4.15 billion respectively, with a year-on-year increase of + 39.9% / – 21.1% / + 16.7%.
1q2022, the company’s domestic and export revenue were 233 / 1.841 billion yuan respectively, with a year-on-year increase of – 1.7% / + 15.8%. In China, Healthcare Co.Ltd(603313) independent brands achieved a revenue of 140 million yuan, a year-on-year increase of + 7.3%. Further subdivided Healthcare Co.Ltd(603313) independent brands, and realized revenue of 865 / 5064 / 3079 / 42580000 yuan for direct sales / distribution / online / hotel respectively, with a year-on-year increase of – 46.1% / + 18.4% / + 25.3% / + 11.5% respectively. Langlefu brand achieved a revenue of 18.87 million yuan, a year-on-year increase of – 46.8%. For the overseas part, in terms of subregions, North America / Europe achieved revenue of 1.34/430 billion yuan respectively, with a year-on-year increase of + 22.6% / + 1.1%; In terms of business, overseas direct sales / online / OEM achieved revenue of 573 / 0.50 / 1.218 billion yuan respectively, a year-on-year increase of + 2.7% / – 32.3% / + 27.1%.
From the operating data of 2021 and 1q2022, the North American channel mor acquired by the company in 2020 was consolidated in February 2020. Therefore, the overseas direct sales achieved good growth in 2021, but its growth rate has returned to the normal level in 2022. Overseas online business was affected by Amazon’s rectification of cross-border e-commerce in 2021, but the current revenue scale is low, and the impact on the overall overseas revenue has tended to be weak. The continuous growth of overseas OEM business indicates that the capacity of the company’s factories in the East and west of the United States is gradually releasing. In China, the company’s independent brand business revenue increased rapidly in 2021, but 1q2022, affected by the epidemic, the revenue growth slowed down, especially langlefu, which is headquartered in Shenzhen and affected by the epidemic, the revenue decreased by 46.8% year-on-year.
In 2021, the number of independent brand direct sales / distribution stores increased by 98 / 372 to 162 / 928 respectively year-on-year; 1q2022, the number of independent brand direct sales / distribution stores increased by 11 / 32 to 173 / 960 respectively.
1q2022 profitability began to recover, and cost rate control achieved results: the company’s gross profit margin was 28.5% in 2021, with a year-on-year increase of -5.4pcts. The gross profit margin of domestic and export sales was 30.8% / 28.5% respectively, with a year-on-year increase of – 1.2 / – 6.0pcts. In China, the gross profit margin of Healthcare Co.Ltd(603313) independent brands was 41.6%, with a year-on-year increase of + 6.3pcts. Further subdivide Healthcare Co.Ltd(603313) independent brands, and the gross profit margin of direct sales / distribution / online / hotel is 65.9% / 40.4% / 56.0% / 25.6% respectively, with a year-on-year increase of + 7.1 / + 7.2 / + 11.1 / + 2.9pcts respectively. The gross profit margin of langlefu brand acquired by the company was 38.3%, a year-on-year increase of -1.1pcts. For the overseas part, in terms of sub regions, the gross profit margin of North America / Europe was 28.4% / 27.5% respectively, with a year-on-year increase of – 6.0 / – 8.9pcts; In terms of business, the gross profit margin of overseas direct sales / online / OEM was 45.7% / 40.5% / 18.2% respectively, with a year-on-year increase of – 0.5 / + 6.5 / – 10.9pcts.
1q2022, the company’s gross profit margin was 29.2%, year-on-year + 0.3pcts. The gross profit margin of domestic and export sales was 25.6% / 29.7% respectively, with a year-on-year increase of – 4.0 / – 0.8pcts. In China, the gross profit margin of Healthcare Co.Ltd(603313) independent brands was 37.5%, up + 3.1pcts year-on-year. Further subdivide Healthcare Co.Ltd(603313) independent brands. The gross profit margin of direct sales / distribution / online / hotel is 58.0% / 32.3% / 57.4% / 27.5% respectively, with a year-on-year increase of – 5.6 / + 9.8 / – 0.7 / + 4.0pcts respectively. The gross profit margin of langlefu brand acquired by the company was 33.8%, a year-on-year increase of -2.6pcts. For the overseas part, in terms of sub regions, the gross profit margin of North America / Europe was 31.8% / 26.1% respectively, with a year-on-year increase of -0.4 / – 2.3pcts; In terms of business, the gross profit margin of overseas direct sales / online / OEM was 47.7% / 38.6% / 20.9% respectively, with a year-on-year increase of + 0.5 / – 30.5 / + 3.1pcts.
The increase in profitability in the first quarter was mainly due to the increase in the proportion of overseas revenue. China’s gross profit margin has been reduced mainly due to the impact of the epidemic, but the core is the improvement of the profitability of the distribution end. Combined with the performance of the distribution end revenue, we believe that the company’s brand management momentum in China’s retail end is getting better and better; In the overseas part, the core improvement of the profitability of the OEM end is mainly due to the improvement of the operating efficiency of American factories.
During 2021, the expense rate was 29.6%, with a year-on-year increase of + 3.5pcts. By item, the rates of sales / management / R & D / financial expenses were 16.1% / 8.2% / 1.5% / 3.7% respectively, with a year-on-year increase of + 2.6 / + 1.1 / – 0.2 / – 0.1pcts respectively. The increase of sales expense rate is mainly caused by the increase of channel expenses, employee salary and advertising investment. The year-on-year increase of management expense rate is mainly affected by the increase of employee salary.
1q2022, the period expense rate was 25.4%, year-on-year -1.4pcts. In terms of sub items, the rates of sales / management / R & D / financial expenses were 13.9% / 7.2% / 1.3% / 3.0% respectively, with a year-on-year increase of -0.8 / – 0.7 / – 0.4 / + 0.5pcts respectively. In the first quarter, the company began to improve in terms of cost rate control during the period. We believe that it mainly benefited from the improvement of the overall operation efficiency of the company.
The decline of raw material prices – the devaluation of RMB is favorable, and the operation efficiency still needs to be further improved: at the beginning of this year, the prices of MDI / TDI / polyether in China were 207 / 1.5911500 yuan respectively, and the prices of three raw materials reached a high in early March, which were 248 / 1.9613400 yuan respectively. At present, they have fallen back to 213 / 1.7611400 yuan.
We believe that the drop in raw material prices will play a positive role in boosting the profitability of 2q. At the same time, as an enterprise whose overseas revenue accounts for more than 80%, the main settlement currency of the company’s overseas operation is the US dollar. According to wind data, the price of RMB against the US dollar in the offshore market was 6.3798 yuan / US dollar on April 18 and 6.6415 yuan / us dollar on April 29, with a depreciation range of 4.1%. We believe that the depreciation of RMB against the US dollar will generate exchange earnings for the company 2q.
According to the data disclosed by the company’s branches in 2021, the net profit loss of AZ branch in the United States was 112 million yuan (Western factory in the United States), and the loss of Healthcare Co.Ltd(603313) in Shanghai, which assumed the function of Chinese brand operation, was 125 million yuan, indicating that the company still needs to continuously improve its operation efficiency and improve its performance outside China.
In the first quarter, the fundamentals showed a positive trend of recovery, with a market sales ratio of only 0.5 times, giving a “buy” rating: we expect the company’s EPS to be 0.43/0.94/1.41 yuan from 2022 to 2024, and the current share price corresponding to PE to be 23 / 11 / 7 times respectively. Given that the company’s peg is less than 1 time (from 2022 to 2025, the net profit attributable to the parent CAGR is 63%), and the company’s PS in 2022 is only 0.5 times, covering for the first time, giving a “buy” rating.
Risk tip: the prices of raw materials and shipping have risen sharply, and the overseas economy has declined.
