Key points of investment:
Start an e-commerce agency and innovate a rookie in small household appliances. Del Mar was founded in 2011. Before the establishment of the company, the founding team had accumulated rich experience in e-commerce e-commerce operations, provided proxy operation services for many well-known brands, and continuously improved e-commerce operation capabilities. The company founded its own brand “Del Mar” in 2011 and acquired the Philips Water Health business in 2018. The company's revenue performance ushered in rapid growth. In 2018-2022, the company's revenue increased from 967 million yuan to 3.307 billion yuan, and CAGR reached 36.00%; net profit to mother increased from 40 million yuan to 191 million yuan, and CAGR reached 47.35%. In 2023, the company adjusted its brand strategy and gradually reduced investment in non-core brands and non-core categories, including “Vantage”. 2024Q1's brand restructuring is nearing its end, and revenue and performance have stabilized. 24Q1 achieved revenue of 716 million yuan, an increase of 7.69% over the previous year, and achieved net profit of 0.23 million yuan, an increase of 0.52% over the previous year.
Del Mar: Focus on cost-effective cleaning appliances. In recent years, the Del Mar brand has continued to reduce the size of non-core categories, and the share of vacuum cleaning in the company's household environment product revenue increased from 41% in 2018 to 68% in 2022. The company grasps the rapidly growing circuit of cleaning appliances and an emerging category of floor scrubbers, adapts to the trend of falling prices of cleaning appliances in recent years, launches cost-effective products and solves the pain points in consumer use, driving the company to steadily increase its share in the cleaning appliance market.
Philips: Expand authorized categories and give full play to the Philips brand power. Since 2018, the company has successively obtained licenses in the categories of Philips Water Health, Portable Massagers, and Fitness Equipment. The company grasps the characteristics of these categories with low domestic penetration rate and strong growth potential, and uses the Philips brand power to achieve rapid revenue growth. The company's Philips brand revenue grew rapidly from 137 million yuan in 2018 to 1,618 million yuan in 2022.
The two brands complement each other's advantages and develop collaboratively. As an Internet brand, Del Mar has an agile advantage in consumer insight and communication; as an internationally renowned small home appliance brand, Philips has a systematic R&D and supply chain management process. The company excellently integrates the advantages of various in-house systems to improve R&D efficiency, reduce operating costs, and drive significant improvements in the company's supply chain and operating efficiency. On the sales side, the company gave full play to Del Mar's advantages in e-commerce operations and the influence of Philips in the global market, and both brands achieved outstanding performance in domestic and foreign sales.
First coverage, giving an “increase in wealth” investment rating. We expect the company to achieve operating income of 35.28/39.51.4421 billion yuan in 2024-2026, up 11.9%/12.0%/11.9% year on year; net profit to mother is estimated to be 1.61/2.10/258 million yuan, +48.0%/+30.4%/+23.0% year on year respectively. The comparable company we selected corresponds to a 2024 PEG of 1.26, and the company's 2024 PEG is 1.10. Corresponding to the current market capitalization, there is room for a 15% increase in market value, and the first coverage gave it an “gain” rating.
Risk warning: Continuity risk of trademark licensing business; risk of increased market competition; risk of fluctuating raw material prices.