Main points of investment:
2018-19 exceeded its net profit commitment at a growth rate of 34% and 41%. Xinghui Precision Cloud completed the acquisition of 100% equity in Zebao Technology in December 2018, with a consideration of 1.53 billion yuan, corresponding to a net profit of 13.9 times PE in 2018, with cash and shares paying 6.39 yuan and 891 million yuan respectively, and the share issue price was 8 yuan per share. In 2018-19, Zebao Technology achieved a net profit of 1.10 trillion yuan, 2% and 6%, respectively, with a growth rate of 34% and 41% respectively. In 2019, Zebao's gross profit margin was 50.52%, and the net profit rate was 5.44%, 29.7% and 29.7%, respectively, with a growth rate of 23.4%. Xinghui used to operate hinges and slide rails, and its net profit was stable in 2011-16, with an average of 39.03 million yuan. since 2017, due to the great fluctuation of raw material steel prices, the net profit of the parent company was 670000 yuan.
Focus on Amazon.Com Inc, six brands boutique operating cross-border business. Zebao Technology was founded in 2007, and more than 95% of its revenue is realized through Amazon.Com Inc. Sales categories include power supply (25%), Bluetooth audio (24%), small household appliances (22%), computer peripherals (8%), personal health care (4%) (cross-border business in 2019 in parentheses), and only 200 core SKU, building six major brands: RavPower, TaoTronics, VAVA, Anjou, Sable and HooToo. Through 10 major Amazon.Com Inc stores in 11 countries and regions, fine deep cultivation of the brand, take the TaoTronics brand as an example, three types of desk lamps ranked in the top 10 of Amazon.Com Inc's sales, only the top TT-DL13 has accumulated more than 17482 comments, we believe that because Amazon.Com Inc does not show cumulative sales, the accumulation of comments ① reflects consumer satisfaction with the goods, while ② helps to improve the possibility of other consumers' choices. Build your own brand moat.
TWS headphones: enjoy penetration bonus. Since Apple Inc and Samsung released TWS (True WirelessStereo) in 2016, the technology of true wireless headphones has gradually matured. Shipments of real wireless headphones have increased from 9.18 million in that year to 120 million in 2019. CAGR136%,20Q1 shipped 43.8 million TWS headphones worldwide, an increase of 86% over the same period last year, but compared with 1.37 billion smartphones shipped in 2019, the penetration rate is only 8.75%, and compared with the overall sales of 3.3 billion headphones per year, there is huge room for growth.
With ultra-high performance-to-price ratio, seize the market opportunity. Zebao Bluetooth audio category has a certain model share. In 2016-19, the revenue CAGR was 29%, and the gross profit margin ranked first in all sectors, reaching 52.3% (2019). We believe that TWS headphones are the mainstay of this sector. TaoTronics covers the price band of US $40-65 and provides quality products of more than US $100. We sort out the top 787 scores of Amazon.Com Inc's "wireless headphones". The star proportion of Zebao audio products is only 25%, with an average of 4.1 stars. Zebao audio products are mostly located in 4.5-5.0stars. In March 2020, Zebao TWS headphones ranked eighth in the world. We judge that Zebao's affordable and high-quality products can quickly gain market share and increase their share.
Profit forecast and valuation. Taking into account the overseas cross-border market space, as well as the company's boutique operating capacity, we estimate that in 2020-22, EPS 0.87-0.95 PE 1.32 will be given in 2020, with a reasonable valuation range of 25.98-30.31 yuan per share, with a "better than big market" rating for the first time.
Risk hint. The overseas consumer market is weak, the international logistics is limited, the international trade rules change, and the risk of impairment caused by the unsalable overseas inventory assets.
