Valuation Is Far More Than The Industry Leader Times Easy "Adverse Market" Raise Investment Who Will Pay The Bill?

On June 8, 2021, Beiyi obtained the approval document of the CSRC for registration. No accident, double easy will become the first massage appliance company to land on the science and technology innovation board.

As a latecomer in the capital market, double easy easily crushed aojiahua (002614. SZ), a leading massage appliance company listed on the main board of Shenzhen Stock Exchange (002614. SZ) and Rongtai health (603579. SH), which were listed on the main board of Shanghai stock market, were far more than Rongjie Health (300247. SZ), which was trapped in huge losses for years.

Close to the nature of science and technology innovation, the financial indicators of beirelaxed far exceed those of Listed Companies in the same industry, and the form of business development is obviously different from that of Companies in the same industry.

In this listing, beixiaotong plans to issue 15.41 million shares and raise 497 million yuan, respectively, for "marketing network construction", "R & D center upgrading construction", "informatization upgrading construction" and "supplementary working capital" projects. Among them, it plans to invest 279 million yuan in the construction of marketing network, and plans to set up 248 Direct stores across the country.

It is worth noting that the proportion of offline revenue of beixiaoli has continuously declined during the reporting period from 2018 to 2020, but the company has gone against the market to raise funds and lay out offline stores. In the small massage appliance market dominated by e-commerce, how much can the company's business strategy win?

With high-risk raised investment projects, times easy has successfully obtained the registration approval of the CSRC, and will soon land in the capital market. Visual China

Revenue of offline Direct stores is not optimistic

According to the prospectus, the company mainly relies on the four categories of smart portable massager products, namely, eyes, neck, head and scalp. During the reporting period, the revenue was 508 million yuan, 694 million yuan and 826 million yuan respectively, and the net profit was 450.972 million yuan, 54.7671 million yuan and 70.4581 million yuan, respectively.

The company's self owned brand "Breo" and "double easy" series products adopt the new retail mode of online and offline integration and interaction, accelerating the shift to e-commerce in the Internet era. During the reporting period, the company's online and offline sales revenue of its own brands accounted for more than 90% of its main business revenue.

In 2018, the company also focused on offline sales channels, accounting for 57.22% of its sales. In the past three years, the company's main revenue channel has gradually turned online, with sales revenue of 171 million yuan, 279 million yuan and 431 million yuan respectively, accounting for 33.70%, 40.26% and 52.27% of the main revenue. Especially during the epidemic period, the company's online sales revenue increased rapidly.

What makes the market puzzled is that, on the one hand, it accelerates the shift to e-commerce sales, but on the other hand, it raises funds to lay out offline Direct stores.

The company said that in order to strengthen the distribution of domestic market outlets and expand market share, it plans to raise 279 million yuan in the next three years to build 248 Direct stores in airports, high-speed rail stations and high-end shopping malls in 19 key provinces and cities, so as to realize the high coverage of the company's marketing network in key transportation hubs and cities.

After the implementation of the project, the company will form a more intensive nationwide marketing network layout, comprehensively enhance the company's competitiveness in the industry, and enhance the company's profitability and competitiveness.

By the end of 2020, the company has 165 Direct stores in China, but the revenue is not optimistic, which has brought huge sales expenses burden to the company. In 2019, the company's sales revenue through direct stores accounted for about 35.55%, while in 2020, it accounted for only 20.07%.

During the reporting period, the operating profits of the company's Direct stores were 33.939 million yuan, 36.99 million yuan and 5.748 million yuan, respectively, and the profit growth rate was far lower than that of double ease's revenue and overall net profit.

From the monthly flat effect (monthly sales per square meter), the company's Direct stores continued to decline significantly during the reporting period, with the amounts of 4252.80 yuan, 3992.69 yuan and 2225.81 yuan, respectively.

The company's offline direct store business, due to the large fixed expenses such as store rent and staff compensation, will have a certain impact on the overall business performance of the company once its sales revenue does not meet the expectations.

As a matter of fact, the proportion of direct sales of double ease is relatively large, which has resulted in the company's sales cost far higher than that of comparable companies in the same industry. During the reporting period, the company's sales expense rates were 36.01%, 41.28% and 41.40% respectively, while the sales expense rates of aojiahua, a leading massage appliance leader, were only 18.29%, 19.73% and 15.77% respectively, less than half of that of double ease.

The company's existing and future stores will face certain competition risks of online sales, which will lead to the risk that the store business operation is not as expected. Knowing that there are many risks and disadvantages brought by the sales mode of Direct stores, beixiaotong still chooses to set up offline investment projects against the market, which may bring some pressure on the overall revenue growth in the future.

Abnormal valuations have been asked many times

With high-risk raised investment projects, times easy has successfully obtained the registration approval of the CSRC, and will soon land in the capital market.

However, the 21st century economic reporter noticed that the current stock price of double ease, which has not yet been listed, has been reported to the high price of 38.04 yuan / share by the institutions. Both the stock price and the price earnings ratio both crush aojiahua, the leading listed company in the same industry.

In December 2019, Danlu investment and other investment institutions were introduced for the last capital increase and equity transfer before submitting the prospectus. The capital increase price was 38.04 yuan / share, and the overall valuation after the capital increase reached 1.759 billion yuan. Based on the net profit of 54.7671 million yuan in 2019, the PE multiple has reached 32.57 times.

In view of this, beixiaotong believes that the company's capital increase and equity transfer price is due to investors' optimistic view of the company's development prospects, and after negotiation, shares are purchased according to the market price, and the valuation pricing is reasonable.

According to the statistics of 21st century economic report, as of June 23, 2021, the arithmetic average of the overall PE multiple of the listed companies on the science and technology innovation board is only 43.16 times, and the overall price earnings of the science and technology innovation board is still relatively overvalued. The price earnings ratio is close to the average value of the science and technology innovation board market.

At present, aojiahua, a leading massage appliance company listed on the main board of Shenzhen stock exchange with revenue of 7.049 billion yuan and net profit of 434 million yuan in 2020, has a P / E ratio of only 24.4 times, and its share price was only 22.90 yuan / share as of June 23.

Rongtai health, which is listed on the main board of Shanghai Stock Exchange, currently has a stock price of 38.34 yuan / share and a price earnings ratio of 23.1 times.

The stock price and P / E ratio of double ease have already crushed the listed companies in the same industry before listing.

An analyst from a securities firm in Beijing told the 21st century economic report that the high P / E ratio of listed companies may be due to the market's optimistic attitude towards the company's development and the market's willingness to give a price. On the other hand, there is also the possibility of being overestimated. The high P / E ratio of the companies to be listed under the registration system may also be intended to push up the company's valuation to meet the market value requirements, But this kind of operation means that the company's issuing premium space in the primary market and secondary market is limited, and the related companies may break through after listing.

Is there any operation of deliberately overestimating the company's valuation in the high P / E ratio of Beiyi?

From the response of beixiaotong, the company believes that the current valuation is reasonable, but its abnormal valuation has been repeatedly inquired by the Shanghai Stock Exchange and the China Securities Regulatory Commission. It is uncertain whether investors in the primary and secondary markets will pick up orders at a high level.

The rationality of high profit is often questioned

It is worth noting that, as a small massage appliance enterprise, double easy has been on the science and technology innovation board, and its scientific and innovative attributes and growth have been questioned since the application for listing.

The data shows that in recent years, China's Intelligent Portable Massager industry has grown rapidly, and the industry competition is becoming increasingly fierce. There are more than 3000 domestic massage appliance manufacturers of various types. On the one hand, the competition of existing large companies in the market competition is intensified, and they continue to improve product performance and ensure service coverage to seize the market; On the other hand, small and medium-sized companies are constantly pouring into the market, hoping to gain market share. The market is facing fierce competition, and the price war continues.

Beixiaotong believes that if the company can not adapt to the fierce competitive environment, keep the technology leading, reduce the online cycle of new products, and timely launch high-quality products according to the market demand, the company may suffer from the adverse situation of product price decline, business income growth slowdown and market share decline.

However, in the prospectus, the profitability of double ease also comprehensively crushed the listed companies in the same industry, and was questioned by regulators and investors for many times.

During the reporting period, the comprehensive gross profit margin of double ease reached 58.19%, 60.93% and 58.36% respectively. In 2020, aojiahua achieved revenue of 2.069 billion yuan of massage small electrical products similar to that of double ease business, and the gross profit rate was 26.30%. After taking into account the relatively high-end large massage chair products, the gross profit rate of aojiahua's health massage business was only 37.55%; In 2020, the revenue of massage small electrical appliances of Rongtai health is 149 million yuan, and the gross profit rate is 19.57%; In 2019, the revenue of massage small electrical appliances of Rongjie health is 231 million yuan, and the gross profit rate is only 3.82%.

In the prospectus, the company did not compare the high gross profit margin with the listed companies in the same industry with similar products and businesses. Instead, it chose stone technology, which mainly engaged in intelligent cleaning robots and other intelligent hardware, and keworth, which mainly engaged in various service robots and cleaning small household appliances, for comparison. During the reporting period, the average comprehensive gross profit margin of the industry obtained by the company was 34.29%, 37.21% and 42.92% respectively, It is still far below the profit level of times easy.

In the prospectus, beixiaotong believes that the company's comprehensive gross profit margin is higher than the average level of comparable companies. Firstly, the company's products are positioned at the high-end line, and the intelligent degree and precision degree of the products have more competitive advantages and enhance the bargaining power with customers. Secondly, there are differences in the sales areas, sales channels and product positioning of the company, and the gross profit rate of export sales is lower than the domestic sales level, Lower the comprehensive gross margin of comparable companies.

It is worth noting that during the reporting period, the prices of head, scalp, neck and other intelligent portable massages have dropped significantly except for the low unit price of eye smart Portable Massager. Among them, the sales unit price of head smart portable massager has decreased from 1295.15 yuan / set in 2019 to 892.82 yuan / set in 2020.

The market of massage equipment is already in the white hot competition state, and the price war is unavoidable. Beixiaotong is facing the market competition with high gross profit.

Beiyitong frankly said that if the future fierce competition in the industry leads to the decrease of product sales price, or the rise of raw material price, or the failure to timely launch new technology-leading products, the company's gross profit rate will decline and the company's operating performance will be adversely affected.

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