3Q20 performance is lower than we expected.
The company announced 3Q20 results: revenue of 800 million yuan, down 9.8% from the same period last year; net profit of 5.59 million yuan, down 80% from the same period last year; deducting non-return net profit of-23 million yuan. Corresponding to 1-3Q20 income of 1.93 billion yuan, down 23.2% from the same period last year; net profit of 149 million yuan, an increase of 38.1% over the same period last year; deducting non-return net profit of-75 million yuan. The company's online growth in domestic sales failed to make up for the decline in offline channels, resulting in lower-than-expected performance.
The online performance is weak, and it is difficult to make up for the offline decline. 1) the Hubei subsidiary of 1Q20 was seriously affected by the epidemic, which led to a large decline in income. The offline channel of 2Q/3Q20 is still declining, mainly because the company's traditional advantage channel is Shang Chao, and the offline channel is still declining due to the influence of e-commerce diversion. 2) the fierce competition in e-commerce channels, affected by the company's Hubei production capacity, the company's cooking utensils share was surpassed by Jiuyang. According to Amoy data monitoring, the online sales of 3Q20 Estelle cookware are + 18% compared with the same period last year, while those of Jiuyang and Supor cookware are + 111% and + 32% respectively, and the scale is higher than that of Estelda brand.
Financial analysis: 1) 3Q20 gross margin year-on-year-5.1ppt to 30.7% 3Q20 gross margin-4.3% to 32.1% year-on-year. Gross profit margin fell more than the same period last year, mainly due to the company's increased product promotion efforts, the average price decreased. 2) the expense rate during 3Q20 period + 4.2 ppt 3Q20 compared with the same period last year + 7.5ppt, mainly due to the increase in the proportion of rigid expenditure when income declined, and the increase of shutdown cost caused by the epidemic. 3) due to the slow recovery of income and the superimposed loss of robot business, 1-3Q20's net profit after deducting non-profit is in a state of continuous loss.
Trend of development
In the first half of the year, the company paid more attention to e-commerce channels, set up a new marketing department, and actively adopted new models such as live broadcast. The company had a total of 122 live broadcasts in the first half of the year, and e-commerce sales increased by 88% in the second quarter compared with the same period last year. In the future, the company plans to focus on promoting e-commerce business, and we expect the company's online share to improve.
Profit forecast and valuation
Considering that the company's online performance has been lower than expected so far this year, we have lowered our 2020 net profit by 27.5% to 169 million yuan, leaving the profit forecast for 2021 unchanged. The current share price corresponds to 19.1 times 2021 / 20.3 times earnings. Maintain a neutral rating and a target price of 9.00 yuan, corresponding to 18.6 times 2020 price-to-earnings ratio and 19.8 times 2021 price-to-earnings ratio, which is 2.4% lower than the current share price.
Risk
The risk of market competition and the risk of RMB exchange rate fluctuation.