The current situation of the company

The company split SharkNinja successfully listed in the United States on July 31, closing with a market capitalization of $5.88 billion.

Comment

Spin-off SN Group US stock listing review: 1) the company announced on February 23 this year that it intends to split its SharkNinja division (excluding the Asia-Pacific region) to be listed independently in the United States, and its share price fell 18% the next day. The demise of the SN division on June 30 caused JS Global Lifestyle Company Limited's share price to fall 84 per cent on the second day. 2) the market believes that when Hong Kong stocks are split to US stocks listed, the trading uncertainty is high, which leads to a sharp fall in the company's share price. Due to the obvious liquidity discount of Hong Kong stocks, we believe that the spin-off of SN listing in the United States is conducive to a significant increase in the valuation of the company. Refer to the in-depth report "JS Global Lifestyle Company Limited: the difference in concept, why the spin-off of SN listing in the United States is good, 2023-02-26" and "Global small household appliances valuation comparison, Hong Kong stock liquidity discount is obvious, 2023-06-07". 3) on July 31, SN went public with a closing market value of US $5.88 billion, while JS Global Lifestyle Company Limited-H closed with a market capitalization of US $610 million in the same period. Based on the current JS Global Lifestyle Company Limited-H share capital, the current combined market capitalization of the two shares is about HK $14.54 per share, which is close to our previous target price of HK $13.10, compared with the closing market capitalization of US $3.496 billion after the announcement of the proposed split listing on February 24, an increase of 85.3%.

The dividend rate of JS Global Lifestyle Company Limited-H, the Hong Kong stock retention group, is expected to increase, leading to an increase in valuation: 1) at present, JS Global Lifestyle Company Limited's retained business is mainly 67% of Jiuyang shares, as well as SN Asia Pacific business. SN's Asia-Pacific business is still small, with an after-tax profit of $7 million in 2022. 2) in terms of financial reporting, the company's mid-2023 report includes two parts: the Hong Kong Stock retention Group and the SN Group, while the 2H23 and subsequent results only include the Hong Kong Stock retention Group. We estimate that the adjusted net profit of the company in 2023 and 2024 will be $236 million (including the corresponding profit of 1H23's original SN) and $80 million respectively. 3) according to the estimate of 67% of Jiuyang shares, the current share price of JS Global Lifestyle Company Limited-H corresponds to about 9.6 times 2023EP/E. 4) A-share Jiuyang shares have maintained a high dividend ratio in history, and the annual dividend rate from 2020 to 2022 is 82%, respectively. Therefore, we think that JS Global Lifestyle Company Limited is capable of carrying out a high dividend similar to that of Jiuyang.

Profit forecast and valuation

As the company's 2023 profit still includes the 1H23 SN component, we mainly use the company's 2024 profit for valuation. We keep the company's profit forecast basically unchanged. The current share price corresponds to a price-to-earnings ratio of 7.5 times the 2024 adjusted net profit. Maintain an industry rating that outperforms. Maintain the target price of HK $1.57.

The target price corresponds to 8.8 times the adjusted net profit in 2024, which is 19% higher than the current stock price.

Risk

Market competition aggravates risk, demand fluctuation risk, exchange rate risk.