Incident: In order to promote the implementation of the maternal and child health strategy, promote the transformation and upgrading of the company's business, and create a new business model of “maternal and child products+health services+Internet”, the board of directors of the company focuses on long-term strategic development and adjusts the business layout based on market demand. It plans to invest 100 million yuan of its own capital to establish a wholly-owned subsidiary, “Rabbi Xinai Sanankang Investment Co., Ltd.” (tentative name), to engage in related business in the fields of maternal and child health, services, training, consulting, etc.
The outbreak of the epidemic has led to changes in demand, and the company has made corresponding adjustments. The epidemic in the first half of the year had a huge impact on the macroeconomic situation at home and abroad, the social and market environment, and business operations were affected to a certain extent. After analyzing the current form, the company adjusts its business strategy.
1) In terms of sales strategy, change the “online+offline” ordering method to an online ordering meeting to solve the ordering problem of franchisees. 2) In terms of product structure, adjust the production rate of the product to make the product structure more suitable for cost-effective consumer demand.
3) In terms of production, increase small-batch manufacturing to meet diverse needs. 4) Strengthen online operations, open up direct sales and join WeChat Mall channels in the first half of the year, vigorously promote online sales, and stabilize performance.
Set up a new subsidiary to open up new service-side business. Catalyzed by the epidemic, the lifestyle, category needs and channel touchpoints of mother and child users have changed. Nearly 60% of mother and child store owners were busy closing their stores in the first half of the year. The customer rate declined, excessive prices were severe, and sales difficulties were difficult, which became the biggest pain point in store operations. In order to adapt to the new situation, the company opened up new businesses on maternal and child health and nursing services, etc., built a new business model of “maternal and child products+health services+Internet”, and moved from a single mother and child product sales to a diversified service platform. Looking at the long term, the new business will help the company expand the market and enhance the company's performance.
Results for the first half of the year were under pressure due to the impact of the pandemic. 2020H1 achieved operating income of 116 million yuan, a year-on-year decrease of 35.65%, and Guimo's net profit was 0.1 million yuan, a year-on-year decrease of 61.4%. The pressure on performance in the first half of the year was mainly due to the sharp decline in the impact of offline sales due to the pandemic, combined with external public welfare donations. Retail sales of clothing, shoes, and hats began to pick up slightly in the second quarter, and offline demand gradually recovered, making the year-on-month improvement in second-quarter results quite obvious. It is expected that the performance growth rate in the second half of the year will be corrected.
Profit forecast: We predict that the company will achieve net profit attributable to the parent company in 2020-2022 to be 42 million yuan, 44 million yuan, and 48 million yuan respectively. The corresponding EPS will be 0.12 yuan, 0.12 yuan, and 0.13 yuan respectively. The current stock price corresponding to PE is 54/52/47.5 times, respectively. As a leading domestic maternal and child products company, the company actively sought changes during the most difficult period of maternal and child products and laid out long-term development. The closure of a large number of maternal and child stores has triggered a reshuffle in the industry. Small and medium-sized enterprises are constantly being cleared. The concentration of the industry is expected to increase further, and leaders may benefit. Maintain a “Prudential Recommendation” rating.
Risk warning: risk of declining performance due to the epidemic; risk of declining industry sentiment; risk of rising raw material prices; systemic risk in capital markets, etc.