20220831-招银国际-JS环球生活-01691.HK-Guidance_revised_but_outlook_is_getting_better_10页_1mb

CMB International Global Markets | Equity Research | Company Update Summary

Core Content Overview

This report provides an update on JS Global Lifestyle (1691 HK), focusing on its financial performance, strategic initiatives, and valuation. The key points include the company's revised guidance, performance in the first half of 2022, and the outlook for the second half of the year. The report also compares the company's valuation with its peers and outlines its financial assumptions and summaries.

Main Points and Key Information

Company Performance (1H22E)

• Sales: Flattish compared to 1H21, at US$2.2bn, in line with expectations.
• Net Profit: Decreased by 14% YoY to US$207mn, also in line with expectations.
• Market Share: Gained significant market share in the US for food preparation (35.2%), cleaning (34.4%), and cooking appliances (25.4%).
• GP Margin: Weak due to a 2ppt YoY decline, primarily from freight and raw material cost inflation, despite tariff refunds.
• Inventory: Increased to 108 days in 1H22E, but the company states it is not a concern, and aims to normalize to 70-80 days by FY22E.

Guidance and Outlook

• FY22E Guidance: Revised down to 0% sales growth and 0% net profit growth from 10% previously, due to industry-wide slowdowns.
• 2H22E Outlook: Expected to see resumption of sales growth and double-digit net profit growth.
• Growth Drivers:
  • New categories/products/region expansions: Expected to contribute 75% to FY22E sales growth.
  • Joyoung's Technology: Leads in necessity product categories like rice cooker, air fryer, and cleaning appliances.
  • New Product Launches: Multiple new products were launched or are to be launched in FY22E, including SharkNinja's outdoor grill, Ninja's cutlery, and Joyoung's cleaning appliances.

Margin Expectations

• Margin Improvement: Expected in 2H22E due to:
  • Absence of reclassification: Freight costs moved from opex to COGS in 1H22E.
  • Favorable FX Rates: Weaker CNY and stable GBP.
  • Potential easing of cost inflation in raw materials and logistics.

Valuation and Target Price

• Current Valuation: At 9x FY23E P/E, significantly below the 5-year average of 17x and peers' average of 14x/16x.
• Target Price: Revised down to HK$11.51 (from HK$11.83), based on an 11x FY23E P/E.
• Valuation Band: JS Global's forward P/E is within the 11x-15x range, indicating an attractive valuation.

Earnings Summary

Key Strategic Initiatives

• New Product Launches:
  • Joyoung: Launches in cleaning appliances.
  • SharkNinja: Launches in hair dryer, air purifier, outdoor grill, ice cream maker, coffee maker, cutlery, and cookware.
• Market Expansion: Focus on new categories, regions, and product lines to drive growth.
• Technology Leadership: Joyoung's leading technology in necessity categories is a key growth driver.

Shareholding and Performance

• Shareholding Structure:

  • Wang Xuning & Concert Party: 56.43%
  • Mark Rosenzweig: 7.87%
  • CDH Fund: 6.10%
  • RSU Holding Entity: 4.88%
  • Mark Adam Barrocas: 2.09%
  • Free Float: 22.63%

• Share Performance:

  • 1-Month: -8.2%
  • 3-Months: +11.2%
  • 6-Months: -3.6%
  • 12-Months: -55.2%

• Market Cap: HK$31,032 million

• Avg 3-Months Turnover: HK$33.30 million

• 52-Week High/Low: HK$20.30 / HK$6.31

Peer Valuation Comparison

Valuation Band and P/E Comparison

• Forward P/E Valuation Band: JS Global's P/E is within 11x-15x, indicating an attractive valuation.
• Comparison with Peers:
  • China Home Appliances: JS Global's P/E is 9x vs peers' average of 14x/16x.
  • International Home Appliances: JS Global's P/E is 11x vs peers' average of 15x.
  • International Small Home Appliances: JS Global's P/E is 11x vs peers' average of 12x.

Financial Assumptions

• Sales Growth by Brand:

  • Joyoung: 2.1% in FY22E, 4.7% in FY23E, 7.6% in FY24E.
  • SharkNinja: 1.0% in FY22E, 5.4% in FY23E, 9.2% in FY24E.
  • Total: 1.3% in FY22E, 5.2% in FY23E, 8.7% in FY24E.

• Sales Growth by Segment:

  • Cleaning: 0.6% in FY22E, 4.5% in FY23E, 7.5% in FY24E.
  • Food Preparation: 1.4% in FY22E, 5.4% in FY23E, 9.4% in FY24E.
  • Cooking: 1.3% in FY22E, 6.3% in FY23E, 10.7% in FY24E.
  • Others: 6.4% in FY22E, 2.0% in FY23E, 1.5% in FY24E.

• Sales Growth by Region:

  • China: 1.2% in FY22E, 4.3% in FY23E, 8.3% in FY24E.
  • North America: 1.0% in FY22E, 5.0% in FY23E, 8.0% in FY24E.
  • Europe: -3.0% in FY22E, 5.0% in FY23E, 13.0% in FY24E.
  • Other Markets: 23.0% in FY22E, 15.0% in FY23E, 10.0% in FY24E.

Financial Summary

Income Statement (YE 31 Dec)

Cash Flow Summary

Conclusion

• Investment Recommendation: Maintain BUY.
• Valuation: JS Global is undervalued at 9x FY23E P/E, compared to the 5-year average of 17x and peers' average of 14x/16x.
• Outlook: Despite the revised guidance, the company is expected to show improvement in 2H22E, driven by new product launches, market share gains, and potential margin improvements.