2021-10-30 Wang Yusi of Zhongtai Securities Co., Ltd. conducted a research on Mercury Home Textile and issued a research report entitled "online high growth continues, product structure upgrading leads to profitability improvement". The current share price is 15.26 yuan.
Mercury Home Textile (603365)
Summary of the report
The company released the third quarterly report of 2021, with an income of 2.456 billion yuan (+ 28.23%), a net profit of 250 million yuan (+ 44.43%), and a net profit of 230 million yuan (+ 77.57%). Among them, the single-quarter income of Q3 was 837 million yuan (+ 11.77%), the net profit of returning to the mother was 86 million yuan (+ 10.18%), and the net profit of non-attribution was 76 million yuan (+ 24.37%).
The high growth on the line continues, and the optimization of the offline structure is progressing smoothly. During the period, the company's revenue was + 28.23% compared with the same period last year, of which Q3 single-quarter revenue grew steadily at a high base, which was 12.74% higher than that of the same period in 2019, which was + 11.77% respectively.
Online: revenue is expected to grow by more than 30% in the first three quarters, accounting for about 50%, of which Q3 is expected to grow by more than 20% in a single quarter. The company's more comprehensive layout in e-commerce channels ensures the steady growth of online revenue. From a sub-platform point of view, the company is still dominated by traditional e-commerce platforms, and we estimate that the e-commerce platforms that account for 50% of top3's revenue in the first three quarters are Tmall / JD.com / Vipshop Holdings Limited, respectively, and remain in the first place in the home textile industry of the above platforms. At the same time, the company is also actively trying to layout new platforms to ensure the high growth rate of online channels. Under the condition of ensuring the unit price of products and strictly controlling the discount rate, the company has launched on Douyin, Pinduoduo, Kuaishou Technology and other platforms one after another. In the future, the company's online channels will still focus on independent operation and the training of self-broadcast teams, form a standardized live broadcast model to improve efficiency, and build high barriers to a long-term sustainable live broadcast mode. At the same time, the company is expected to achieve outstanding performance in the layout of new channels such as Douyin, Kuaishou Technology and Pinduoduo.
Offline: the overall offline revenue is expected to be flat in the first three quarters compared with the same period last year. From a sub-channel point of view, we expect the Q3 part of the franchise revenue to be affected by the epidemic and extreme weather factors, while the new stores in the direct operation end have expanded smoothly, and the stores continue to cover the blank areas in tier 1-2 cities, and the revenue is expected to increase compared with the same period last year. On the product side, the company increases the display area of core products in stores and increases the proportion of high value-added SKU. In addition, the company has changed the dealer order meeting mode (twice a year in the past, and this year has carried out order meetings on multiple occasions and on different topics) to continuously improve the ordering efficiency of dealers. Looking forward to Q4, with the gradual weakening of external factors and the continuous improvement of operational efficiency, offline business is expected to return to growth.
Product structure optimization & high growth of e-commerce and improvement of overall profitability. The gross profit margin in the first three quarters was + 3.16/+0.53pcts to 38.62% respectively compared with the same period in 2019, which has now exceeded the pre-epidemic level, mainly due to the optimization of product structure (the increase in the proportion of high value-added products), the strict control of discount rate and the increase in the proportion of revenue from direct marketing and e-commerce channels. In terms of expenses, the sales expense rate was from + 1.66PCT s to 20.43% compared with the same period last year, mainly due to the rapid development of online and direct channels during the period, the increase in advertising and traffic expenditure, and the advance of direct store opening fees. At the same time, the different order meeting cycle (the second order last year will be held in October) and the reduction of social security expenses in the same period last year also affected the sales rate. Management / R & D expense rate year-on-year-0.8/-0.66pcts to 4.45% Universe 1.83%. Overall, the company's net interest rate was + 0.38PCTs to 10.87% compared with the same period last year.
The improvement in inventory turnover and the increase in stock size led to an increase in cash outflow. The inventory scale during the period was from + 32.81% to 1.099 billion yuan compared with the same period last year, mainly due to the increase in the cost of Q3 raw materials and the company's adequate stock for the peak sales season of Q4. At the same time, turnover efficiency continued to improve due to improved sales, with turnover days ranging from-17.62 to 164.06 days compared with the same period last year. Accounts receivable turnover days are + 0.55 to 28.24 days compared with the same period last year. In addition, due to the increase in purchasing cash, the net operating cash flow of the company is-147 million yuan. With the arrival of the winter sales season, the company will become a regular employee at the end of Q4.
Profit forecast and investment advice: in the long run, the company is one of the domestic home textile leaders, e-commerce channel has obvious first-mover advantages, and the overall cost-effective advantage is prominent, in the trend of consumer upgrading, the market share is expected to continue to increase. In the short term, the company's online business is expected to maintain rapid growth under the multi-channel, multi-category and multi-form three-dimensional operation framework, and the operation efficiency is expected to be improved under the channel upgrade, data empowerment and organizational structure optimization. We expect the annual attributable net profit in 2021-22-23 to be 362xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx / 1-9-8, maintaining the "overweight" rating.
Risk tips: industry demand is lower than expected; joining business is not as expected; direct business expansion is not as expected; e-commerce growth and gross profit margin are not as expected.
A total of seven agencies have rated the stock in the last 90 days, including 3 buy ratings and 4 overweight ratings; the average institutional target price in the past 90 days is 16.8; according to the Securities Star valuation analysis tool, Mercury Home Textile (603365) has a good company rating of 3 stars, a good price rating of 3.5 stars and a comprehensive valuation rating of 3.5 stars.