Mercury Home Textiles (603365) Quarterly Report Review: 19Q3 Performance Exceeds Market Expectations, Online Channels Recover Rapidly, Profitability Continues to Improve

Mercury Home Textiles (603365) Quarterly Report Review: 19Q3 Performance Exceeds Market Expectations, Online Channels Recover Rapidly, Profitability Continues to Improve

Event: The company announced the third quarter of 2019 results, and the company achieved revenue of 20 in the first three quarters of 19 years.

1.8 billion (+11.

89%), realizing net profit attributable to mothers2.

1.5 billion (+18.

78%), and realized deduction of non-net profit1.

8.4 billion (+14.

75%), achieved steady growth, and the performance slightly exceeded market expectations.

The company achieved revenue 7 in the quarter of 19Q3.

4.2 billion (+15.

43%), and realized a net profit of RMB 80 million (+31).

14%), and realized non-net profit of 76.95 million yuan (+51.

28%).

The growth rate of online channels exceeded market expectations, and offline channels continued to grow steadily. 1) Online channels: The company’s online channels exceeded market expectations. We expect online channels to grow by about 17% in the first three quarters of 19 years.

Among them, 19Q1 is expected to be -10.

5%, 19Q2 is 30.

1%, 19Q3 is about 38% growth level.

Negative growth of the company’s e-commerce channel in 19Q1. We believe that it is mainly due to the traffic diversion of mainstream e-commerce platforms. At the same time, the high base of 18Q1 overlaps, leading to the negative growth of the e-commerce channel in 19Q1.Focus on different marketing solutions and product arrangements for different e-commerce platforms. Since the 19Q2 quarter, the company’s online e-commerce channels have improved significantly. The growth rate in the second and third quarters exceeded market expectations, achieving more than 30% growth.It reflects the company’s sustainable e-commerce operation capabilities.

We expect the company’s online channels to achieve double-digit growth in 19 years.

2) Offline channels: The company’s offline channels have maintained steady growth. We expect offline channels to grow by around 9% in the first three quarters of 19 years.

Among them, 19Q1 is expected to be 7.

5%, 19Q2 is 13.

7%, 19Q3 is about 8% growth level.

The company’s offline channels still maintained a good momentum in the third quarter, with steady growth.

At present, the company’s stores are expected to be around 2700. In recent years, the company has improved and improved the quality of its stores. New stores are mainly large stores. Old stores have improved store image and location optimization.

In the context of the company’s few net openings in recent years, offline channels have been able to achieve steady growth. We believe that this is mainly due to the same store growth, which also shows that the company has achieved significant results in improving store quality.

For the whole of 2019, we expect the company’s offline channels to achieve growth of more than 10%.

The gross net interest rate constant increased, and profitability improved.

Gross profit margin: In the first three quarters of 19, the company achieved a gross profit margin of 38.

09% (+ 3.

18pct).

The Q3 single-quarter gross profit margin was 38.

95% (+5.

79 points).

The company ‘s gross profit margin has increased significantly. We believe that the main reasons are: 1) the company has higher pricing power, and the price of raw materials has been taken into account in the autumn and winter product pricing, and the overall price has increased; 2) the company’s product structure has been continuously optimized, and high-end products, etc.The proportion of products with higher gross profit margins increased, and the amount of the company’s gross profit margin continued to increase.

Expense ratio: The company’s expense ratio increased in the first three quarters of 19, of which the sales / management / finance expense ratio was 19 respectively.

38% (+2.

91 points), 7.

26% (-0.35 points), -0.

34% (-0.

05pct).

The increase in the company’s sales expense ratio was mainly due to the increase in advertising, transportation costs and sales staff costs.

By quarter, the sales / management / financial expense ratio of the company in 19Q3 was 17 respectively.

94% (+3.

02pct), 7.

44% (-0.

88pct), -0.

33% (-0.

2pct).

Asset impairment loss: In the first three quarters of 19, the company’s asset impairment loss was 10.99 million yuan (+137.

36%), mainly due to the impact of the company’s inventory depreciation.

Although the company’s asset impairment losses have grown rapidly, the ratio of the absolute amount of its inventory depreciation to the company’s inventory amount is small and has little effect.

Net Margin: As the gross margin increased slightly higher than the expense ratio, the company’s net margin increased slightly.

In the first three quarters of 19, the net interest rate was 10.

64% (+0.

62pct).

Q3 net profit is 10.

78% (+1.

29pct).

The company’s inventory has increased slightly, and the net operating cash flow has improved significantly. Inventory: The company’s inventory in the first three quarters of 19 was 8.

980,000 yuan (+7.

86%), a slight increase.

Accounts receivable: The company’s account receivables in the first three quarters of 19 were 1.

8.4 billion (+17.

60%), improving growth, increasing about 4.
.

36%, a slight increase.

We think it is mainly due to the period of the online platform account period, and the company’s online channels are growing rapidly.

The net operating cash flow is: the company in the first three quarters of 19 years.

09 million yuan, -1 in the same period of 18 years.

60 billion US dollars improved; 19Q3 single quarter was 5.91 million yuan, compared with 19Q2 from negative to positive, a significant improvement.

As the company’s sales peak in the second half of the year, especially in the fourth quarter, is also the peak of repayment, the company’s cash flow is expected to gradually improve.

The company released the first phase of the employee stock ownership plan budget. The maximum scale of funds to be raised is not more than 34 million yuan, and each share is 1 yuan.The highest equity is 0.

75%.

The total number of participants in this employee shareholding plan does not exceed 50, including 1 supervisor, with a duration of 36 months.

The company’s share repurchase program for employee stock ownership can motivate employees and highlight the company’s development confidence.

Maintain “Buy” rating.

Considering that the company continues to benefit from the consumption upgrade in low-tier cities; the online growth will continue to stabilize after gradual improvement and measures are taken, and the company’s performance will continue to grow steadily in the 杭州桑拿网 long run.
Home textiles is a highly standardized industry. We believe that the conversion to e-commerce and offline channels continue to penetrate in low-tier cities, and the concentration of the entire industry will significantly increase.
We maintain our highest profit forecast, with revenues expected to be 30 in 19-21.

5.6 billion, 34.

7 billion, 39.

68 ppm with a growth rate of 12 respectively.

40%, 13.

53%, 14.

35%; net profit is 3 respectively.

310,000 yuan, 3.

8.3 billion, 4.

460,000 yuan, an increase of 16 in ten years.

15%, 15.

62%, 16.

51%.

Therefore, the EPS is expected to be 1 in 19-21.

24/1.

44/1.

67 yuan.

Maintain the company’s 19x PE at 19, with a target price of 24.

80 yuan.

Risk warning: offline channel revenue is less than expected, and new online channel shocks intensify competition.

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