The current situation of the company
Recently, we visited the management and controlling shareholders of Gome Retail and had an in-depth exchange on the implementation path of the second phase of the company's "Home Life" strategy and the framework agreement on the provision of management services to five companies.
Comment
1. Develop new business with escrow mode, reduce investment risk and enjoy potential income. On October 11, the company entered into a framework agreement with Gome Management, which is wholly owned by major shareholders, agreeing to provide management services and charge management fees for Gome, shared co-construction, grooming, Anxun logistics and Gome cellar of the target company. the time period is from January 1, 2022 to December 31, 2024. According to the framework agreement, the company has the following rights: ①, if the annual operation of the five entrusted enterprises reaches the agreed target, the company will receive the equity reward of the entrusted enterprise; ② during the service period, the company has the right to acquire no more than 30% of each of the five entrusted enterprises. We believe that the above five enterprises are an important part of Gome's "Home Life" ecosystem, and this framework agreement will help to integrate the diversified formats, new store operation and co-construction and sharing system planned in the early stage of the strategy into the retail system of listed companies. strengthen collaborative management, aimed at creating a complete retail closed loop, and accelerate the implementation of the second phase of the strategy. Listed companies develop new business through the escrow model, which reduces the risk of capital investment and uncertainty, and the management fees collected can also contribute to the increase in income. at the same time, equity incentives and share options protect the potential income if the new business is successful to a certain extent.
2. Pay attention to the implementation of the company's "family life" strategy and the progress of external cooperation. Around the "family life" strategy, the company continues to promote the development of six platforms, including online, offline, supply chain, logistics, big data & cloud, sharing and co-construction. The company actively promotes the integration of online and offline scenes and promotes the upgrading of entertainment marketing through live streaming and other modes. In the first half of the year, the company completed about 75,000 live broadcasts, reaching more than 38 million users, achieving a 30% year-on-year increase in the number of communities and an overall GMV growth of 24.42%. At the same time, it opened up an efficient supply chain, empowered third-party merchants, and accelerated category expansion. Currently, there are more than 600000 SKU, of which non-household appliances account for more than 90%. In addition, the company continues to promote cooperation with Shenzhen Investment Control, JD.com, Pinduoduo and Yi Yatong in the aspects of capital, supply chain, channel and industrial chain, paying attention to the company's strategic transformation and external cooperation progress.
Valuation and suggestion
The current stock price corresponds to 0.3 times of 2021 / 2022 / 0.3 / 2022 / 2021 / 2022, respectively. Maintain the neutral rating, taking into account the positive impact of the framework agreement on the company's business transformation, raising the target price by 7% to HK $0.93, corresponding to 2021 prime 0.3 times Phand S in 2022, which has 9% upside compared to the current share price.
Risk.
Competition in the industry continues to intensify, consumer demand is low, and the effect of the transformation is not as good as expected.