Event

The company released its quarterly report: 2020Q1-3 achieved a revenue of 3.466 billion yuan, an increase of 53.06% over the same period last year, and a net profit of 203 million yuan, an increase of 125.09% over the same period last year.

The single Q3 company realized revenue of 1.412 billion yuan, an increase of 57.52% over the same period last year, and a net profit of 76 million yuan, an increase of 120.55% over the same period last year.

Brief comment

The performance continues the high growth trend in the first half of the year.

The overseas supply chain has been significantly affected by the epidemic, and the cross-border e-commerce industry continues to benefit. The company's performance in the third quarter continued the high growth trend in the first half of the year, with the single Q3 company's income / return net profit increasing by 57.52% and 120.55% respectively.

The profitability has improved significantly

Q1-3 company sales gross profit margin 48.65%, year-on-year increase in 4.92pct, is expected to mainly benefit from the company's higher gross profit margin of small household appliances revenue share drive.

In terms of expense rate, the company's expense rate in the first three quarters was 40.6%, an increase of 1.6pct over the same period last year, in which the sales / management / finance / R & D expense rate was 34.39%, 2.84%, 1.82% and 1.55%, respectively, and + 1.7/-1.7/+1.7/-0.1pct, respectively. The increase in the rate of sales expenses is expected to be mainly due to the increase in platform costs, logistics, promotion and other expenses caused by the substantial increase in sales, while the decline in management costs is mainly due to the dilution of economies of scale caused by the rapid growth of sales. the change in the rate of financial expenses is mainly affected by financing and exchange gains and losses.

In terms of net interest rate, benefiting from the increase in gross profit margin and the basic stability of expense rate, 20Q1-3 company's net sales margin was 6.14%, an increase of 2.15pct compared with the same period last year. In the third quarter, the company's net profit rate of sales was 5.76%, an increase of 1.83pct compared with the same period last year.

The penetration rate of e-commerce driven by overseas epidemic is accelerated, and the value of cross-border e-commerce docking with domestic high-quality supply chain is highlighted.

According to the eMarketer forecast, affected by the epidemic, a large number of consumption will shift to e-commerce, the global e-commerce transaction volume will maintain 16.5% positive growth to 3.9 trillion US dollars in 2020, and the global e-commerce penetration rate will rapidly increase from 13.6% in 2019 to 16.8%. The epidemic has accelerated the penetration rate of global e-commerce in two years. At the same time, when the overseas supply chain / production capacity is greatly affected by the epidemic, and the traditional trade mode is affected by the price increase of shipping companies, the value of cross-border e-commerce enterprises docking domestic high-quality and stable supply chain resources is prominent. At the same time, we believe that the improvement of overseas e-commerce penetration will be a long-term trend, and the development space of high-quality cross-border e-commerce enterprises will continue to expand.

Zebao's fine operation ability is excellent, and its growth is promising.

Zebao as a leading domestic cross-border e-commerce enterprise, the main competitive advantage lies in: ① category and SKU strategy: the company adopts boutique e-commerce strategy, category focuses on the field of consumer electronics, SKU is only about 100. compared with "shop" cross-border e-commerce, the company focuses on best-selling items, and the use of funds is more efficient. ② supply chain and R & D: all the company's products are researched by the company itself, and the upstream supply chain is integrated through OEM by mastering the terminal consumer demand. At the same time, the company's centralized SKU is easier to bring the scale effect of the purchasing side for the company; ③ channel: at present, the company is mainly based on the online Amazon.Com Inc platform, supplemented by offshore channels, and in the future the company has more room to expand overseas offline channels, domestic online and offline channels ④ brand: different from other cross-border e-commerce, the company has strong brand awareness and its products are sold in the form of its own brand. In the future, with the expansion of the company's sales scale, the brand effect will gradually appear, and the company's sales scale will promote each other. ⑤ management: the company launched a stock incentive plan to mobilize the enthusiasm of core staff, while business staff incentives in place. In addition, the company will inventory management throughout the whole operation, management efficiency continues to improve.

Investment suggestion: the company's 2020-2022 net profit is expected to be 3,3.9 and 510 million respectively, corresponding to 23,18,14 times of PE, covering for the first time and being rated as "overweight".

Risk factors: intensified competition in the industry; changes in the rules of e-commerce platform; less than expected expansion of channels and new products