The 2020 performance is higher than we expected.
The company announced its 2020 results: revenue of HK $8.3 billion, down 5.4% from the same period last year; net profit of HK $257 million, corresponding to HK $0.15 per share, an increase of 27% over the same period last year, exceeding our expectations due to good control of operating expenses and optimization of financial costs.
Core strategic brand revenue decreased 4.7% to 6.8 billion yuan compared with the same period last year. In terms of brands, 1) Cybex brand revenue increased 8.1 per cent year-on-year to HK $2.66 billion, with core market revenue rising 9.6 per cent to HK $2.21 billion and other market revenues up 1.2 per cent to HK $447 million. With high-end brand positioning, global operations and supply chain, distribution channel expansion and new product launches, Cybex has recovered strongly and gained market share since May 2020. 2) gb brand revenue decreased by 12.8% year-on-year to HK $2.47 billion, of which China market revenue decreased by 11.5% to HK $2.3 billion, mainly because the epidemic affected offline direct operations and wholesale businesses, but online channels still achieved positive growth; in terms of categories, gb non-durable goods revenue achieved strong growth. 3) Evenflo brand revenue decreased by 9.3% year-on-year to HK $1.67 billion, of which North American market revenue decreased by 7.7% to HK $1.62 billion. Evenflo revenue recovered from June 2020 and achieved positive growth in 3Q20, but due to repeated logistics disruptions caused by the epidemic, Evenflo delayed shipments to major retailers at the end of the year, affecting revenue performance. In addition, blue-chip business revenue decreased slightly by 1.1% to 1 billion yuan compared with the same period last year. With the gradual recovery of the domestic epidemic, 2H20 blue-chip business revenue increased by 8% year-on-year.
Gross profit margin and operating profit margin are higher than the same period last year. The increase in the share of Cybex brand revenue with high gross margins led to an increase in the company's overall gross profit margin by 1.1ppt to 44.2 per cent in 2020; the sales expense rate decreased by 0.3ppt compared with the same period last year, as a result of lower warehousing and transportation costs, staffing and reduction in labor savings, as well as lower retail channel rents and commissions; operating profit margins increased by 0.7ppt to 5.2 per cent.
The days of receivables, payables and inventory turnover have increased. The turnover days of receivables and notes increased by 3 days to 48 days; the days of accounts payable and notes turnover increased by 8 days to 108 days due to the extension of the account period; and the days of inventory turnover increased by 16 days to 156 days, mainly due to the interruption of global logistics affected by the epidemic, resulting in delays in shipments to major customers at the end of the year.
Trend of development
Looking to the future, the company expects Cybex to achieve strong global revenue growth and increase market share driven by continuous product portfolio innovation; gb will continue to implement digital transformation, while planning to expand in domestic low-line cities by joining; Evenflo will launch new products with higher profits, and continue to expand B2C platform in the global market.
Profit forecast and valuation
We have raised our 2021 EPS 22 forecast by 34% to HK $0.19 by 51%. The current share price corresponds to 6.6gamma 5.4 times 2021e/22e price-to-earnings ratio and maintains a neutral rating. Taking into account the high uncertainty of overseas epidemics and the company's relatively high overseas revenue, we slightly raise our target price by 6% to 1.46 Hong Kong dollars, corresponding to 7.5gamma 6.1 times 2021 gamble 22-year price-to-earnings ratio, which has 13% upside compared with the current share price.
Risk.
The epidemic situation at home and abroad is repeated, and the channels are not as good as expected.