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In this article, we sort out the basic situation of the company in the light of the company's semi-annual report and current situation.
Comments:
Clothing cleaning products are still the basic plate of the company. The company's 22H1 realized revenue of HK $2.88 billion, an increase of 22.4%. In terms of categories, the revenue of clothing cleaning / personal cleaning / household cleaning reached HK $24.5 million, an increase of 25.1%, 6.5% and 11.7%, respectively. Clothing cleaning 22H1 accounts for 85% of the company's revenue, and from historical data, clothing cleaning products account for more than 80% of the company's revenue, which is the absolute basis of the company's business. The company's leading products detergent and hand sanitizer are widely praised and have remarkable advantages. according to the China Chamber of Commerce, they have occupied the first place in the comprehensive market share of similar products for 13 consecutive years (2009-2021). The detergent launched by the company has led the Chinese market to upgrade by leaps and bounds from detergent powder to detergent and ordinary detergent to concentrated detergent. In recent years, the company continues to expand new functional products to strengthen its product portfolio, such as launching special detergent for sportswear, special detergent for underwear, foam bacteriostatic detergent and other products to consolidate its position and promote performance growth.
Online is still the main sales channel, but offline is growing strongly under the continued reform of distribution. The revenue of 22H1 online / offline / direct sales reached HK $1.477 million respectively, down 9.9% / an increase of 98.5% / an increase of 90.6% over the same period last year. In summary, online is still the company's main sales channel, but its share has declined slightly in recent years, from 53.9% in 2020 to 51.2% of 22H1. Although the online revenue of 22H1 has declined due to the impact of the epidemic, such as shipping and increased competition, it still maintains a leading position, ranking first in multiple online platforms during the 618th Shopping Festival. In terms of offline channels, the company continues to strengthen cooperation with local distributors, improve the distributor management system, increase the terminal coverage of the distribution network and the product delivery rate of stores, and expand the sales network to convenience stores, fresh food supermarkets and small and medium-sized local stores to seize the opportunity of brand upgrading in offline cities and deepen the penetration of offline distribution network into offline channels to maintain rapid growth. In terms of direct sales, the company's market share continues to increase, and the market share of Meituan's home care category continues to lead the first. JD.com 's market share of home clothing care has risen to the first place, and the rankings of ele.me, multi-point and other platforms have also improved.
The downward profit elasticity of raw material prices is expected to be released. Since Q4 last year, the price of palm oil, the raw material of the company, has been rising continuously, and the average spot price of 22H1 has risen by about 45.8% compared with the same period last year. However, under the condition of lower discount on prepaid accounts, price locking with suppliers and low inventory reserves, the gross profit margin of 22H1 has only decreased to 53% compared with the same period last year, which remains stable. The price of palm oil has been declining since July, and the average price of 22Q3 has dropped by about 35.8% month-on-month. The improvement trend of gross profit in the second half of the year has been determined, and it is expected that net profit may also improve as the company optimizes sales expenses and improves human efficiency.
Clothing cleaning bibcock, channel reform has achieved results. According to the demand of the subdivided track, the company actively develops new functional products, accelerates the sinking of the market layout and deepens the distribution system, and revenue is expected to grow steadily; at the same time, raw material prices fall & improve operational efficiency and improve profitability. However, taking into account the fact that the company needs to invest more marketing resources in the daily chemical industry and the adverse impact of exchange rate depreciation on the company, we estimate that the company's net profit for 2022-2024 will be 722x975pm (HK $1413,815 million before 22-23), and the corresponding share price PE will be times that of 37-28-22. With reference to the absolute valuation method, the target price of HK $7 will be given and the "recommended" rating will be maintained.
Risk tips: online channel competition intensifies; new product promotion does not meet expectations; offline channel adjustment does not meet expectations and so on.