Revenue and profit performance in '22 were weak. Profitability may pick up in '23. JS Global Life (JS) released its 2022 annual report on March 31: total revenue was about US$5.041 billion, YOY -2.12%, net profit of the mother was about US$332 million, YOY -20.98%, lower than previous expectations (net profit of 424 million US dollars). Overseas small household appliance inventories are high, demand from dealers is gradually weakening, and revenue growth is under pressure. In particular, revenue pressure in the North American market is high, and tariff exemptions and falling freight charges are expected to drive a recovery in profitability. We adjusted our revenue, gross margin, etc. forecasts, and introduced a 25-year forecast, predicting net profit of US$4.11/476/519 million for 23-25 (previous value: 4.60/529/100 million US dollars). As of March 31, 2022, Bloomberg Comparable Corp. unanimously anticipated PE 13.6 times in 2023, considering the company The growth rate slowed marginally. We gave the company a PE valuation of 12 times over 23 years and adjusted the target price to HK$11.12 (previous value: HK$11.40, corresponding to 12 times PE in 22 years). Keep “buying.”
Revenue from all categories is under pressure in 2022. Looking at the European region's relatively better products, in 2022, the company's cleaning appliances revenue was 1.94 billion US dollars, YOY -1.14%, food cooking appliances of 1,762 million US dollars, YOY -5.68%, cooking appliances of 1,013 million US dollars, and YOY -3.14%.
Looking at the subregions, the company's revenue in North America in 2022 was -1.21% year on year, China's revenue was -6.51 percent year on year, and European revenue was +2.52% year on year.
Gross margin declined slightly throughout the year, and gross margin clearly rebounded in 2H22
The company's gross margin in 2022 was 37.3%, YOY -0.07pct (2H2022 gross margin was 36.23%, YOY +1.33pct). This is mainly due to 1) an increase in shipping costs, and 2) tariff exemptions offset some of the increases in freight and promotional costs. Considering that freight costs have dropped significantly, and the Office of the United States Trade Representative announced that the new tariff exemption was extended until September 30, 2023, the company is expected to continue to benefit from products related to the company, including vacuum cleaners, air fryers, and air purifiers. In 2022, the sales and distribution expenses ratio was basically the same, and the management expenses rate increased by 1.7 pct, mainly due to higher employee costs.
It is proposed to split the SharkNinja division and go public in the US
The company announced on February 23 that it intends to spin-off SharkNinja's American and European business (accounting for about 70% of revenue and profit in 2022) to be listed in the US. After implementation, a parallel listing structure for the company and SharkNinja will be established, and the company's shareholders will become direct shareholders of SharkNinja. Since the spin-off event was not conducive to investors directly holding US stocks, it caused great disturbances in the company's stock price.
Risk warning: increased competition; rising raw material prices; fluctuating demand in North America.