2021-11-01 Chen Meng of Shouchuang Securities Co., Ltd. conducted a research on Rongtai Health and issued a research report "Company brief Review report: Q3 Quarterly income growth, short-term performance pressure", this report gives a buy rating to Rongtai Health. The current share price is 28.32 yuan.

Rongtai Health (603579)
Core point of view
Event: the company released its three-quarter report for 2021, with revenue of 1.865 billion yuan during the reporting period, an increase of 32.72% over the same period last year (an increase of 14.48% over the same period in 2019), and a net profit of 189 million yuan, an increase of 18.13% over the same period in 2019 (down 9.74% from the same period in 2019).
Comments:
Q3 single-quarter revenue growth, short-term performance under pressure. The company's Q1/Q2/Q3 achieved revenue of 520 million / 730 million / 620 million yuan in a single quarter, respectively, compared with the same period last year, which was + 59.49%, 31.76%, 17.14% and 15.91%, respectively, compared with 2019Q1/Q2/Q3 + 1.80%, 24.25% and 15.91%, respectively. Q1/Q2/Q3 achieved a net profit of 69 million / 72 million / 48 million yuan in a single quarter, which was + 131.82%, 3.24% and 20.36% respectively compared with the same period last year (compared with 2019Q1/Q2/Q3 + 67.00% + 9.41%, 33.01%). Q3 revenue continues to grow rapidly in a single quarter, which we believe is mainly due to the rapid development of the domestic market and the rapid growth of demand in overseas markets, especially in North America. The company's Q3 performance growth rate is lower than the income growth rate. We believe that the first reason is the decline in gross profit margin affected by the adjustment of raw materials and freight policies, and the second is the company's cumulative credit impairment loss of 28 million. It is mainly the long-term receivables caused by the transfer of shared massage chairs; third, the financial expenses doubled year-on-year in the first three quarters due to the issuance of convertible bonds.
Multi-factor disturbance, profit level under pressure. The company achieved a gross profit margin of 27.13% in the first three quarters, year-on-year-5.27pcts, mainly due to the rise in raw material costs and the adjustment of freight accounting policies. The rates of sales / management and R & D / financial expenses in the first three quarters are the same-3.13pcts/-0.82pcts/+0.34pcts to 8.48% to 7.49% and 0.98% to 0.98%, and the company's net interest rate is from-0.80pcts to 9.91% compared with the same period last year. Among them, the single Q3 gross profit margin is 24.73% (year-7.98pct), and the net interest rate is 7.27% (year-3.76pct).
The new spokesperson promotes the brand image, and the equity incentive helps the long-term development. On October 25, the company official Xuan Wang Yibo became the global spokesman of the massage chair, further promoting the upgrading of the company's brand image. Prior to this, the company launched the equity incentive and management partner plan, binding the interests of management and core backbone, and the performance evaluation objectives are directly linked to the company's operation, which is conducive to the long-term and stable development of the company.
Investment advice: massage chair industry penetration improvement space, the company's products and channels leading, maintain the "buy" rating. Since its inception, the company has been deeply rooted in the massage chair industry, leading the layout of products and channels, and improving the global brand strength. Taking into account the short-term pressure on raw materials, shipping and other aspects, we downgrade the company's profit forecast. It is estimated that the company's 2021-2023 net profit will be 2.53 million (the original forecast value is 346 million), corresponding to the current market capitalization of PE is 16-13-11 times, based on the gradual improvement of the company's comprehensive strength, to maintain the "buy" rating.
Risk tips: raw material costs fluctuate sharply, the global "COVID-19" epidemic is repeated, and the exchange rate fluctuates sharply.

A total of 10 agencies have rated the stock in the last 90 days, including 8 buy ratings, 1 overweight rating and 1 neutral rating; the average institutional target price in the past 90 days is 36.41; according to the Securities Star valuation analysis tool, the Rongtai Health (603579) good company has a rating of 3.5 stars, a good price rating of 4 stars and a comprehensive valuation rating of 3.5 stars.