3Q21 performance is lower than we expected.
The company announced 3Q21 results: revenue 900 million yuan, year-on-year + 12%; return net profit-15.815 million yuan, year-on-year-383%; deduction of non-return net profit-21.19 million yuan, + 6% year-on-year. Corresponding to 1-3Q21 income 2.46 billion yuan, year-on-year + 28%; return net profit 5.131 million yuan,-97% year-on-year; deduct non-return net profit-26.451 million yuan, + 65% year-on-year. The company's performance is lower than we expected, mainly due to the pressure of rising prices of raw materials, although the company's revenue side has achieved good growth, but the profit situation is not as good as expected.
Domestic sales are relatively weak, and export sales are dragged down by the exchange rate: 1) the traditional advantage channel of the company's domestic sales is Shang Chao, which is greatly affected by e-commerce diversion; the company's adjustment of the channel structure obviously lags behind, and the online performance is still weak. According to the monitoring of the business staff, the online sales of 3Q21 Estelle cookware are-15.6% compared with the same period last year, and the online sales of Jiuyang and Supor cookware are + 35.2% and + 16.6% respectively, and the scale is higher than that of the Estelle brand. 2) the company's export income increases rapidly, but it is dragged down by the appreciation of RMB. The average exchange rate of US dollar to RMB in July / August / September 21 was 6.47 / 6.48 / 6.46 respectively, which was-7.6% / 6.6 / 5.2% compared with the same period last year.
Under the pressure of rising prices of raw materials, profitability is more fragile: 1) 3Q21 gross profit margin year-on-year-7.7ppt, month-on-month-3.4ppt. The year-on-year decline in gross profit margin is mainly due to the high price of 3Q21 raw materials, the depreciation pressure of the US dollar and the increase in the proportion of exports; from a month-on-month point of view, rising raw material prices lead to deterioration of profitability. 2) 3Q21's sales expenses are-20% year-on-year, the sales expense rate is 5.4% lower than the same period last year; the management expenses are-4% year-on-year, and the management expense rate is reduced 1.1ppt. 3) the credit impairment loss of 3Q21 Company is 7.04 million yuan, which is mainly due to the increase in the provision for bad debts of accounts receivable under the rapid growth of export business. 4) 3Q21 deducts 21.19 million of its non-net loss, and the 2Q21 gap continues to expand, reflecting that it is difficult for the company to resist the negative pressure of rising raw material prices.
Development trend
1) the development of the company's cross-border business is mediocre. By the end of October 21, the company expects Jiang Chen Intelligence to complete the repurchase of 20% of the company's Jiang Chen Intelligence shares. We expect that the company will devote more resources to its main business in the future. 2) the company's sales channel adjustment in domestic cooking utensils lags behind its competitors. Although the layout of emerging e-commerce, content e-commerce and O2O business has been strengthened in the first half of this year, the adjustment effect is not satisfactory, and the effect of online operation still needs to be improved. 3) the company's export income is growing rapidly, but the ability of the contract manufacturing business to resist costs is weak, and the company's profitability is still under pressure.
Profit forecast and valuation
Considering the pressure on the cost of raw materials, we cut the net profit of 2021 to 37 million yuan / 98 million yuan by-50% to 37 million yuan / 98 million yuan in 2022. The current share price corresponds to a price-to-earnings ratio of 60.1 / 22.8 in 2022. To maintain a neutral rating, as the company is on the edge of break-even and its performance fluctuates greatly, we temporarily maintain our target price of 7.37 yuan, corresponding to 26.3 times 2022 price-to-earnings ratio, which has 15% upward space compared with the current stock price.
Risk
The risk of fluctuating market demand and the risk of rising prices of raw materials.
