20201116-招银国际-敏华控股-01999.HK-Shift_into_high_gear_by_rapid_store_expansion_4页_652kb

Man Wah (1999 HK) Summary

Core Content

Man Wah (1999 HK) is a company in the Chinese furniture sector that has demonstrated strong performance and growth potential. The company's equity research update highlights its positive outlook for FY21E-22E, driven by several key factors including rapid store expansion, competitive products and marketing, and robust overseas orders despite FX pressure. The current price of the stock is HK$13.42, with a market capitalization of HK$51,037 million.

Key Financial Highlights (YE 31 Mar)

Main Points and Analysis

• Positive Outlook: CMB International Securities is highly positive on Man Wah for FY21E-22E due to rapid store expansion, competitive products and marketing, and strong overseas orders.
• Sales Growth: In 1H21, sales grew by 19% YoY, beating the BBG consensus of 19% sales growth in FY21E. The growth was driven by 53% sales increase in China (65% online, 50% offline) and resilient US sales with only a 1% decline.
• Profitability: Net profit increased by 7% YoY, but the gross profit margin in China dropped by 1.5ppt due to renovation subsidies, sales rebates, and ASP decline. However, better margins from other segments offset this decline. Adjusted net profit would have risen by 26% if excluding FX and one-off investment fair value changes.
• Store Expansion: The company has accelerated its store expansion in China, opening 658 new stores in 1H21 (30% YoY growth), compared to 260 in 2H20. Management expects at least 400 new stores in 2H20E, aiming for 5,000 total stores by FY23E.
• New Leadership: A new CEO, Feng Guo Hua, has been appointed. He brings experience from Microsoft and IBM and aims to boost efficiency through digitalization in areas such as operation, customer relationship management, and overseas businesses.
• Valuation: The current valuation is 21x FY3/22E P/E and 1.2x 3 years PEG, which is considered attractive compared to peers like Jason Furniture (31x P/E, 2.3x PEG) and Oppein Home (32x P/E, 2.4x PEG). The company has room for further EPS upgrades and valuation re-rating.

Valuation Table

Shareholding Structure

• Mr. Wong Man Li & Family: 62.12%
• Free Float: 37.88%

Share Performance (Absolute & Relative)

CMBIS Ratings

• BUY: Stock with potential return of over 15% over next 12 months
• HOLD: Stock with potential return of +15% to -10% over next 12 months
• SELL: Stock with potential loss of over 10% over next 12 months
• NOT RATED: Stock not rated by CMBIS
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark
• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark
• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark

Key Points

• Rapid Store Expansion: MW is expanding quickly, especially in China, with 658 new stores opened in 1H21.
• Competitive Products and Marketing: The company is leveraging the current promotional environment with active marketing strategies.
• Overseas Orders: Despite FX pressure, overseas orders remain robust, with bookings full until CNY 2021.
• New CEO: Feng Guo Hua, with experience from Microsoft and IBM, is expected to drive digitalization and efficiency improvements.
• Valuation: The current valuation is considered attractive with a P/E of 21x and PEG of 1.2x.

Analyst Certification

The research analyst certifies that all views expressed accurately reflect his or her personal views and that no part of his or her compensation is related to the specific views in this report. The analyst also confirms that he or she has not dealt in the stock covered in this report within 30 calendar days prior to the report's issue.

Important Disclosures

• The report is for informational purposes only and not investment advice.
• CMBIS does not provide individually tailored investment advice.
• The value of investments is uncertain and may fluctuate.
• The report may not be reproduced or distributed without prior written consent.
• The report is subject to change without notice.
• CMBIS may issue other publications with different information or conclusions.