Feike Electric (603868) 2019 First Quarterly Report Review: Operating Adjustments Cause Short-term Pain Replacement and Gradually Improve 19-Year Performance

Feike Electric (603868) 2019 First Quarterly Report Review: Operating Adjustments Cause Short-term Pain Replacement and Gradually Improve 19-Year Performance
Event: Feike Electric released the 2019 first quarter report, revenue 8.4.6 billion (-4.4%), net profit attributable to mother 1.6.3 billion (-6.3%), still subdivided on the base of 18Q1, single-quarter performance was lower than market expectations.  Opinion: The e-commerce dividend has weakened, overlapping inventory has continued to decline, and traditional category growth has reduced short-term pressure on the company’s 19Q1 revenue by -4.4%, continuing the trend of small fluctuations in 18Q4, mainly because the e-commerce channel dividend is approaching the end, and repeated short-term offline destocking has led to the company’s replacement.In terms of products, it is expected that the old categories will be reduced by more than 5% every year, and the new products of household appliances and plug-in boards will start to increase revenue.  We summarized the company’s current situation in the review of the 18th Annual Report: the significant e-commerce dividend in the past few years is coming to an end, meanwhile, the increase in the average price of traditional categories has narrowed, revenue has entered a stage of steady growth, and the contribution of new categories of consumer electronics has temporarily decreased.The growth of future growth requires the continuous upgrading of sustainable product structures, and the cultivation of new categories and new channels must be ensured.  The cost dividend boosted the gross profit margin, and the profitability was basically stable. The prices of the main raw materials steel and plastics fell, and the gross profit margin rose slightly by 0 in 19Q1.6 points.On the expense side, the company’s sales expense ratio / management expense ratio / research and development expense ratio are respectively +1.1pct / + 0.5pct / + 0.8pct, financial interest rate increased by 0 as interest income decreased.3pct, the final net margin fell by 0.4 points to 19.3%.  In order to optimize the inventory of the dealers, it takes time for the company to de-allocate the inventory in 2019Q1. The company’s accounts receivable decreased significantly from the previous month, but continued to increase by 38% for two main reasons: (1) e-commerce customers’ accounts receivables increased rapidly;(2) In 2018, the company established a new purchasing company to increase the proportion of raw materials collection and procurement, and the account receivables generated by the cooperative foundries purchasing raw materials from the company increased.  At the same time, due to active stocking in response to the shortage of goods in the same period last year, the company’s inventory has risen rapidly in recent quarters, and inventory in 2019Q15.500 million, not significantly lower than the previous month, is expected to be related to optimizing offline dealer inventory.  Performance outlook: adjustment and downward adjustment are favorable for 19-year performance income outlook: the conversion of e-commerce and price increase dividends are nearing completion, and the company’s traditional categories have entered a stage of stable growth. It is expected that the future growth rate will remain at 0?Between 10%, in 2019, it is expected that plug-in boards and household appliances can begin to contribute incrementally.If the volume of new products is rapid, the company’s consolidated revenue growth rate is expected to reach about 10%, and the growth rate in the first half of the year is expected to show a trend of low before high.  Net profit outlook: Due to the strong pricing power of the company’s industrial chain, the reduction from 16% to 13% is expected to significantly increase the company’s profitability. It is expected that the profit growth rate in 19 years will be faster than the income growth rate.  To build future growth capabilities, the two major strategic directions need to accelerate landing. Barriers to high-end and low-end razors are still high, but the demand for traditional categories has entered a stable stage. In the long run, the company 北京桑拿洗浴保健 needs to focus on building future growth capabilities and diversify categoriesThe two strategic directions of internationalization and internationalization need to be accelerated.  品类多样化:公司已积累的渠道优势和供应链能力,品类多样化是变现上述优势,打开内销空间的可行战略,公司已于2018年上市加湿器,吸尘器等生活电器品类,并于2019年 早期Launch of patch panels and health scales.  Internationalization: With cross-border e-commerce as the breakthrough point in 2018, the company has cooperated with cross-border e-commerce such as Global Easy Shopping, Tongtuo and overseas e-commerce, and has developed overseas distributors in the United States, Europe, South Korea, Vietnam and other countries.In 2018, overseas sales revenue reached 24.3 million yuan, with private brands accounting for 60%. In 2019, it will more than double its growth.  Investment recommendation: The company’s performance for the second 杭州夜网论坛 consecutive quarter is lower than market expectations, mainly due to the end of the e-commerce channel dividend. The offline channel has experienced short-term pain due to operating adjustments, and the company has not yet found a new growth point, but benefited from the downward adjustment.It is expected that the company’s 19-year revenue and profit growth rate will improve. In the long run, the company’s traditional categories have entered a stage of steady growth, and the two strategic directions in the future need to be accelerated.As the offline channel adjustment progress exceeds expectations, the EPS forecast for 2019/20/21 is lowered to 2.22/2.33/2.53 yuan (the original EPS forecast was 2.32/2.50/2.70 yuan), corresponding to PE 19/19/17 times, the company’s barriers in the field of low-end razors are still high, the allocation rate is close to 4%, maintaining the “overweight” level.  Risk Warning: 1. Intensified market competition; 2. New product launch feedback was less than expected.