20220331-招银国际-JS环球生活-01691.HK-Uninspiring_guidance_and_a_cheap_valuation_6页_1mb

CMB International Global Markets | Equity Research | Company Update Summary

Core Company Information

• Company: JS Global Lifestyle (1691 HK)
• Parent Company: China Merchants Bank
• Current Price: HK$9.16
• Target Price (TP): HK$11.54
• TP Change: +26.0% (from previous TP of HK$22.35)
• Rating: BUY (Maintain)
• Auditor: Ernst & Young

Key Financial Highlights

• FY21 Result: Sales grew by 23% YoY to RMB 5.2bn, Net Profit increased by 22% YoY to RMB 420mn, in line with estimates.
• FY22E Guidance: Management guided for ~10% sales and ~10% net profit growth, which is considered fairly conservative.
• Valuation: Trading at 10x FY22E P/E, below the 5-year average of 17x and lower than international peers (19x–21x).
• Payout Ratio: Increased to ~44% in FY21, from ~35% in FY20.
• Yield: Current yield is at 5%, with a 12% increase expected in FY22E.

Performance and Outlook

• Sales Mix:
  • Joyoung: 27.3% in FY22E, down from 27.9% in FY21.
  • SharkNinja: 72.7% in FY22E, up from 72.1% in FY21.
• Gross Margin: Slightly below expectations, at 38.8% (vs CMBI estimate of ~40%).
• Opex: Better than expected at 26% of sales (vs CMBI estimate of ~28%).
• Profitability Concerns: Despite guidance, profitability remains under pressure due to rising costs (metal, plastic, energy, FX, transportation).

Joyoung's Performance and Measures

• FY21 Performance: Sales and net profit dropped by 6% and 21% YoY, respectively, missing BBG estimates by 9% and 21%.
• FY22E Measures:
  • New product launches.
  • Expansion into new product categories (e.g., cookware, water purifier, cleaning appliances).
  • Greater focus on DTC, retail sales, and customer analytics.
  • Potential for more shares repurchase.

Earnings Revision

• Revenue: Revised down by 5.6% for FY22E, 5.5% for FY23E.
• Gross Profit: Revised down by 10.1% for FY22E, 10.7% for FY23E.
• EBIT: Revised down by 15.6% for FY22E, 14.5% for FY23E.
• Adjusted Net Profit: Revised down by 22.5% for FY22E, 15.7% for FY23E.
• Adjusted EPS: Revised down by 22.5% for FY22E, 15.7% for FY23E.

Valuation Comparison

• Peers Valuation:
  • JS Global: 12x FY22E P/E, 10x FY22E P/E (current).
  • Joyoung: 12.6x FY1E P/E, 11.0x FY2E P/E.
  • International Peers:
    • A+ H shares: Average P/E of 18.9x, median of 17.9x.
    • International Home Appliances: Average P/E of 15.3x, median of 10.7x.

Financial Summary

Income Statement

• Revenue: FY22E at US$5,628mn, up 9.3% YoY.
• Gross Profit: FY22E at US$2,182mn, down 10.1% from old estimates.
• EBIT: FY22E at US$669mn, down 15.6% from old estimates.
• Adjusted Net Profit: FY22E at US$443mn, down 22.5% from old estimates.
• Pre-tax Profit: FY22E at US$619mn.
• Net Profit Attributable: FY22E at US$440mn.

Cash Flow Summary

• Net Cash from Operating: FY22E at US$616mn.
• Capex & Investments: FY22E at US$118mn.
• Net Cash from Financing: FY22E at US$160mn.
• Cash at End of Year: FY22E at US$1,519mn.

Balance Sheet

• Non-current Assets: FY22E at US$1,967mn.
• Current Assets: FY22E at US$4,144mn.
• Current Liabilities: FY22E at US$1,896mn.
• Non-current Liabilities: FY22E at US$966mn.
• Total Net Assets: FY22E at US$3,141mn.
• Shareholders' Equity: FY22E at US$3,141mn.

Key Ratios

• P/B: FY22E at 1.3x, down from 1.7x in FY21.
• ROE: FY22E at 14.0%, down from 17.0% in FY21.
• Net Gearing: FY21 at 18.3%, indicating a net cash position.
• 3-year PEG: FY22E at 0.8x, indicating potential for growth.

Summary of Main Points

• Low Valuation: The current valuation is seen as conservative, with the stock trading at 10x FY22E P/E.
• Guidance: Management guidance for FY22E is considered reasonable and achievable.
• Performance: FY21 results were mixed, with SharkNinja performing well and Joyoung underperforming.
• Future Outlook: JS Global is expected to maintain growth through new product launches and category expansion.
• Risk Factors: Continued cost inflation and weak demand in the US may affect profitability.
• Investor Confidence: Despite challenges, the stock is maintained at BUY with a revised target price.