Basic events
The company released three quarterly reports: the first three quarters of the revenue of 12.152 billion yuan, +42.33% year-on-year, two-year CAGR of 23.65%; the net profit attributable to the mother of 1.117 billion yuan, +22.38% year-on-year, the two-year CAGR of 18.04%; the deduction of non-attributable net profit of 992 million yuan, +25.13% year-on-year, the two-year CAGR of 14.21%. Single Q3 revenue of 4.465 billion yuan, +18.24% year-on-year, two-year CAGR 19.85%; net profit attributable to the mother of 451 million yuan, +0.57% year-on-year, two-year CAGR of 16.79%, net profit of non-attributable 379 million yuan, year-on-year -6.53%, two-year CAGR of 6.68%.
Investment essentials
The traditional business performed solidly and was basically in line with expectations
High base, double reduction, and repeated impact of the epidemic, the traditional business revenue of Q3 was 2.372 billion yuan, +2.40% year-on-year, and the two-year CAGR was 10.73%, and the overall performance was stable. In terms of sub-categories, writing instrument revenue was 918 million yuan, +4.64% year-on-year, two-year CAGR 13.13%, gross profit margin was 39.51%, year-on-year -0.21pct; student stationery was 972 million yuan, -2.13% year-on-year, two-year CAGR 3.05%, gross margin was 32.68%, year-on-year -0.60pct; traditional office income was 620 million yuan, +12.35% year-on-year, two-year CAGR 25.28%, gross profit margin was 25.74%, and gross profit margin was 25.74%. Year-on-year -0.66pct, raw materials, accounting standards adjustment slightly affected the performance of profit margins. During the period, M&G's revenue was 166 million yuan (+23.10%), and The revenue scale of arson was about 100 million yuan (about +40%). It is comprehensively estimated that the net profit of the traditional business is about 420 million yuan and the net profit margin is about 17.5% (-1.9pct). Under the double reduction, dealers tend to be conservative, the change of consumer demand in the real terminal still needs to be observed, we believe that the company's channels are solid, the online gradual increase, the high-end is progressing smoothly (boutique cultural creation, children's beauty growth rate is better), the moat & growth logic is still smooth, continue to be optimistic about the company's long-term steady growth.
Kolip continued to increase high, and Jiumu achieved a positive turn in a single quarter
(1) Kelip: Q3 revenue of 1.805 billion yuan (+42.94%), gross profit margin of 9.87% (year-on-year -2.58pct), during the period of new customers to develop smoothly, old customers continued to increase, the scale of revenue continued to increase. The proportion of government & central enterprise customers has increased steadily, and during the year, it was shortlisted for the procurement projects of central enterprises such as Sinopec, China Tobacco, and Guodian, and the government procurement projects of Shenzhen Municipal Government and Wuhan Municipal Government, corresponding to the increase in the proportion of territorial service providers, which slightly lowered the gross profit margin performance, but due to the low expense ratio, the impact on net profit margin was actually limited, and the superimposed company continued to optimize the product structure & category extension, and the net profit margin performance continued to rise month on month.
(2) Large retail stores: Q3 revenue of 288 million yuan (+46.62%), of which Jiumu income of 255 million yuan (+54.80%), 33 to 436 new stores (directly operated 299, joined 137), accelerated store opening, efficiency improvement, product high-speed iteration, single store income and ping efficiency have improved, Q3 single quarter smoothly achieved a turnaround, optimistic about the future opening of stores & single store performance under the promotion of performance.
The adjustment of raw materials & revenue structure slightly dragged down profit margins, and operating efficiency improved steadily
In the Q3 single quarter, considering the adjustment of the freight caliber of accounting standards, we calculated the gross sales difference of 16.47% (-2.43pct), mainly due to the impact of raw materials and the increase in the proportion of low gross profit businesses such as Colllip & Jiumu. Q3 management + R&D expense ratio of 5.41% (+0.2pct), financial expense ratio of -0.03% (-0.16pct), attributable net profit margin of 10.10% (-1.77pct). Q3 Net operating cash flow of 625 million yuan (-143 million yuan), mainly due to the increase in inventory (1.515 billion yuan, +337 million yuan year-on-year), inventory turnover days of 41.59 days (-13.86 days), receivables turnover days of 39.59 days (-1.01 days), and the steady improvement of operating efficiency.
Equity incentives highlight development confidence, and short-term disturbances do not change the logic of long-term growth
In April 2020, the company released the equity incentive plan, unlocking the conditions for 19 years, 20-22 years of revenue growth is not less than 15%/45%/75%, net profit growth is not less than 10%/34%/66%, 20 years of successful completion of the target, 21/22 year target income of not less than 161.54/19.497 billion yuan, the target profit is not less than 14.21/17.60 billion yuan, according to the performance of the first three quarters, the annual completion of the incentive target is basically no pressure. Although there are negative factors such as double reduction, high base and raw materials in the short term, the company's channel moat & market share improvement logic is still smooth, and the business of Collep & Jiumu is gradually improving, and it is firmly optimistic about the company's steady growth in the future.
Earnings forecasts and valuations
During the period, multiple factors disturbed the growth rate, but the company's barriers & medium- and long-term growth did not change, we expect the company's revenue in 21-23 years to be 16.631, 206.54, 25.381 billion yuan, an increase of 26.59%, 24.19%, 22.89%; the net profit attributable to the mother of 15.17, 18.46, 2.220 billion yuan, an increase of 20.83%, 21.72%, 20.25%, corresponding to PE of 38.86X, 31.92X, 26.55X, respectively, Maintain a Buy rating and be bullish on the value of your long-term investment!
Chief Analyst of Light Industry Manufacturing Industry
Master of Engineering, Columbia University, USA. From April 2015 to March 2017, he worked in the research department of China Galaxy Securities, where he was engaged in the research of agriculture, forestry, animal husbandry and fishery industry, and joined soochow Securities Research Institute in April 2017 to engage in light industry manufacturing industry research, and has served as the chief of light industry manufacturing industry since 2018. In 2017, It ranked 5th in the manufacturing industry of New Fortune Light Industry and 3rd place in 2019. In July 2020, he joined the Zheshang Securities Research Institute.
Mobile/WeChat: 18811064824
Ma Li Deputy Director of Zheshang Securities, Head of Large Consumption, Chief Analyst of Textile and Apparel Industry
He holds a bachelor's degree from Nanjing University and a ph.D. in economics from the Chinese Academy of Social Sciences, and currently works at the Zhejiang Securities Research Institute, and has worked for the China Textile Industry Association, China Galaxy Securities Research Department, and soochow Securities Research Institute. In 2019, New Fortune Light Industry and Textile and Garment ranked 3rd, Crystal Ball Textile and Garment Industry Ranked 1st; 2018 Textile and Garment Industry Crystal Ball Ranked 1st; 2016-2017 New Fortune Textile and Garment Industry Ranked 1st; 2015 New Fortune Textile and Garment Industry Ranked 2nd; 2014 New Fortune Textile and Garment Industry Ranked 4th; 2013 New Fortune Textile and Garment Industry Ranked 2nd; 2012 New Fortune Textile and Garment Industry Ranked 4th
Mobile/WeChat: 15601975988
Fu Jiacheng is a researcher in the light industry manufacturing industry
Bachelor of Investment, Master of Central University of Finance and Economics, worked at Soochow Securities Research Institute from July 2019 to May 2020, covering the light industry manufacturing industry, and joined Zhejiang Securities Research Institute in June 2020.
Shuyan Yang, researcher in the light industry manufacturing industry
With a bachelor's degree from Shanghai Jiao Tong University and a master's degree from the Hong Kong University of Science and Technology, he joined the Zheshang Securities Research Institute in March 2021, covering the light industry manufacturing industry.
Mobile/WeChat: 13611883185
Dushan, researcher of light industry manufacturing industry
With a bachelor's degree from Zhejiang University, a master's degree from the University of Illinois and the University of Chinese of Hong Kong, Shenzhen, he joined the Zheshang Securities Research Institute in May 2021, covering the light industry manufacturing industry.
Mobile/WeChat: 15306560432
Disclaimer: The above content is for the reference of institutional investors only and does not constitute investment advice, and the company's value judgment shall be subject to the official report.
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