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王彥囡小姐(Wang Yannan)
分析師

畢業於中國科學技術大學,獲管理學碩士學位,求學期間主修財會和經濟學。現為輝立證券持牌分析師,主要負責環保公用及新能源的研究,專注於從宏觀政策、行業及基本面角度挖掘投資價值。

Graduated from the University of Science and Technology of China with a Master`s degree in Management and major in Financial accounting and Economics throughout her academic study.Currently Covering Environmental Protection and New Energy sectors as an analyst in Phillip Securities and focus on the macro policy,industry and fundamentals to explore the investment value.


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SUPOR (002032.SZ) - Sustained and steady growth can be expected

Thursday, January 18, 2018 Views1152
SUPOR
Recommendation on  18 January 2018
Recommendation Accumulate
Price on Recommendation Date $42.450
Target Price $47.500

Summary of Investment

- Benefiting from the upgrading of consumption and urbanization, there is room for the increase of sales price and volume of cookware and kitchen appliances;

- With restricted equity incentive and result appraisal, sustained and steady growth can be expected;

Investment Rating

SUPOR is a leading enterprise in the field of cookware and small appliances. Benefiting from its own brand and channel advantages as well as product upgrade and market expansion, the Company is expected to see sustainable and steady growth in the overall result in the future. It is expected that the Company's net profit attributable to the shareholders of the listed company will reach RMB13.04 million and RMB15.57million in year 2017-2018, equivalent to RMB1.59and 1.9 EPS, and 26.7 and 22.4 PE, respectively; the Company will achieve full coverage for the first time with the grade of Accumulate. (Closing price as at 16 Jan 2018)

Company Overview

SUPOR, founded in 1994 and listed on the Shenzhen Stock Exchange in 2004, is headquartered in Hangzhou. It is the largest and second largest manufacturer of cooking utensils in China and around the world. The Company owns a total of five research and development bases and mainly operates in the four major areas of open-fire cookware, small kitchen appliances, kitchen appliances and home furnishing. From 2012 to 2016, the Company's revenue and net profit recorded a compound growth of 14.75% and 23.1%, respectively. In 2016, its revenue was RMB11,947 million, of which 36.5% came from cookware, 62.5% from electrical appliances, 69.7% from domestic sales and 29.4% from foreign trade. The Company has maintained the first place and the second place in the market of cookware business and markets of 9 categories of small kitchen appliances, respectively for many years.

In 2006, SEB Group in France became SUPOR's controlling shareholder and currently holds 81.17% stakes in SUPOR. SEB Group has more than 150 years of operating history and its market share of cookware and small appliances ranks the first in the world. The strategic cooperation with SEB has brought stable export sales market to SUPOR. The cookware and small electrical appliances produced by the Company are sold to 51 countries and regions in the world through SEB Group. In addition, the two parties are engaged in further cooperation in R&D, management and other fields and the overall coordination effect has facilitated continued improvement in the Company's core competitiveness.

Main businesses witness steady growth and cash flow is sound

In the first three quarters of 2017, the Company's revenue reached RMB10,497 million, a year-on-year increase of 18.85%, and the net profit attributable to the parent company was RMB896 million, a year-on-year increase of 20.78%, up by 23.31% yoy excluding non-recurring items, equivalent to an EPS of RMB1.09, up by 20.77% yoy. The Company forecasts the annual growth of net profits attributable to the parent company was 0-30%, equivalent to RMB1,077 million -1,4 00 million.

In the first three quarters, the revenue was 39.46 / 29.63 / 35.87, respectively; the net profit was 3.66 / 2.30 / 2.99, respectively; taking into account the sales seasons in the fourth quarter such as Double 11 and the Spring Festival, the annual growth is expected to fall in the middle and high growth range. In addition, the net operating cash flow was RMB822 million during the period, up by 35.07% yoy, and the cash backflow was sound.

The gross margin is slightly affected by the cost of raw materials

The cost rate for the first three quarters was 18.78%, down by 0.13pct yoy, of which the financial expenses increased by 96.27% yoy due to the loss of exchange. However, due to the small base in the previous year, the overall impact was limited. Affected by the rising cost of raw materials, the overall gross margin fell by 0.97pc to 29.56% yoy, and the net profit margin fell by 0.94pct to 8.55% yoy. Specifically, the single-quarter gross margin of the third quarter was 28.6%, down by 1.13pct yoy. With external raw material prices rising, the Company has focused on improving internal operational efficiency, accelerated the process of product standardization, effectively transferred cost pressures and reduced the volatility of gross margin.

The Company has taken root in the tier-3 and tier-4 markets to enhance e-commerce operations

The Company has strong capability to develop and manufacture cookware and small appliances and led the development of the industry through continuous product innovation and category expansion. In terms of offline channels, the Company has a stable team of distributors, continued to enhance the coverage ratio and density of outlets in the tier-3 and tier-4 markets, and improved the service system of the tier-3 and tier-4 markets. In terms of e-commerce channels, the Company has continued to enhance the professional operation of e-commerce and maintained the rapid growth of e-commerce channels. The market share of the Company in major e-commerce platforms increased rapidly in the first half of 2017. It is believed that the Company still has ample room for development in the tier-3 and tier-4 markets thanks to the upgrade of consumption and urbanization.

SUPOR has acquired SSEAC to enhance the competitiveness of home furnishing business

In October 2017, the Company acquired 100% equity interest in SSEAC held by its controlling shareholder, SEB International, with its own funds of RMB2.74. SSEAC mainly engages in the production and export of household electrical appliances such as irons. In the first half of 2017, its revenue reached RMB154 million and the net profits were RMB5,644,200. The acquisition helps to consolidate the business landscape of the Company and its controlling shareholders in the Chinese market and enhance the competitiveness of household electrical products. At the same time, the incorporation into the consolidated financial statements will also help to enhance the Company's overall result. On the other hand, the acquisition will promote the expansion of other export businesses and domestic sales and fuel continuous expansion of foreign trade business.

The Company has carried out restricted equity incentive with result appraisal combined.

The Company recently announced the restricted stock grant program and announced to grant 3.874 million restricted shares to 181 incentive subjects, involving senior management, middle management and core business persons. At the same time, the Company set the result appraisal program for incentive subjects. First, the yield of net assets should not be less than 18% during each appraisal year from 2017 to 2020. Second, according to the completion ratio of domestic sales revenue and domestic operational profits, the number of restricted stocks subject to the removal of restricted sales that incentive subjects can gain during all removal periods is determined. This incentive program will effectively stimulate the enthusiasm of the team, improve operational efficiency and achieve sustained and steady growth in result.

Risk Warnings

Risk of macroeconomic fluctuations;

Risk of rising price of raw materials;

Risk of overseas market expansion;

Risk of exchange rate fluctuations;

Financials

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本文所包含的意見、預測及其他資料均為本公司從相信為準確的來源搜集。但本公司對任何因信賴或參考有關內容所導致的損失, 概不負責。輝立証券(香港)有限公司(或其任何附屬公司)、其董事、高級人員、分析員或僱員可能持有所述公司的股票、認股證、期權或第三者所發行與所述公司有關的衍生金融工具等。此外,本公司及所述人士均隨時可能替向報告內容所述及的公司提供投資、顧問或其他服務,或買賣(不論是否以委託人身份)及擁有報告中所述及公司的證券。本電子報並不存有招攬任何證券買賣的企圖。
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