\u3000\u3000 Zhang Xiaoquan Inc(301055) (301055)
Investment logic
China's time-honored knife and scissors enterprise - Zhang Xiaoquan Inc(301055) : the company's brand was founded in 1628. The company completed the joint-stock reform in 2018. At present, it is mainly engaged in the sales of knives and scissors. The production is mainly outsourced processing and multi-channel integrated sales. In recent years, the company's brand marketing and channel expansion have been continuously promoted, driving the performance to rise steadily. From 2017 to 2020, the revenue / net profit attributable to the parent cagr3 were 18.8% / 16.8% respectively. In the first three quarters of 2021, the company's revenue / net profit attributable to the parent company increased by + 32% / + 21% year-on-year to RMB 520 million / 60 million respectively.
Demand differentiation + high-end promote industry expansion and pattern optimization: China's knife and scissors market has a large scale and maintains stable growth, with a scale of 54.28 billion yuan and cagr8 of 9.8% in 2020. At present, the two major trends of knife and scissors demand differentiation and high-end are becoming more and more obvious, which will jointly promote the continuous expansion of the industry. From the perspective of concentration, according to our calculation, the current market share of the company is less than 1%, and the pattern is still scattered. Due to the relative scarcity of medium and high-end brands in the industry, the overall industry concentration is expected to increase marginally with the trend of high-end.
Brand & quality, channel positioning + accurate playing method: the strength of brand and channel is the key to determine the choice of consumers. With the two fundamental elements of brand & quality, the company has accurate strategic positioning and effective playing method of all channels, laying the foundation for its gradual growth in recent years, especially online channel playing method, Focus on building younger brands and developing targeted products to adapt to consumer groups. The marketing rhythm is accurate, so that the monthly sales of Alibaba stores in 2020 are basically stable in the top two. The share of scissors on Alibaba platform has exceeded 20%, and the online per capita output value cagr2 exceeds 34%.
The company's performance growth has basic support and elastic space: revenue side: 1) under the condition of medium and high-end demand expansion in the knife and scissors industry, the company has prominent cost performance advantages in the middle-end market, the high-end market benefits from its own marketing strengthening and national trend, the share is expected to increase, and the main industry is highly certain to achieve super industrial growth; 2) The company is actively expanding categories horizontally and advocates differentiated playing methods. The subdivided categories are expected to usher in a breakthrough first, and the second growth pole may be expected to be gradually opened. Profit side: 1) from 2018 to 2020, the gross sales difference of the company's online channels was more than 8% higher than that of offline channels, and the overall online net profit margin was better than that of offline channels. The trend increase of online proportion will drive the profit margin to rise; 2) The actual net amount raised by the company's listing is 200 million yuan, which is mainly used for the transformation of intelligent manufacturing center and information technology. The expansion of production will also be conducive to the improvement of production efficiency. In the long run, if all knife and scissors products are self-made, according to our calculation, the gross profit margin in the future is expected to increase by 2.3 PCT compared with 2020.
Investment advice
We estimate that the company's EPS from 2021 to 2023 will be 0.58 yuan, 0.75 yuan and 0.96 yuan. The current share price corresponding to PE from 2021 to 2023 will be 39x / 30x / 25X respectively, giving the company a reasonable valuation of 35 times in 2022 and a corresponding target price of 26.1 yuan. It will be covered for the first time and rated as "overweight".
Risk tips
New product development is less than expected; Quality control of outsourced products; The price of raw materials has risen sharply; The ban on restricted shares was lifted.
