Maintain BUY and lifted TP to HK$ 9.97, based on 19x FY21E P/E (raised from 19x FY21E P/E as its product mix is benefited amid the virus outbreak). 1Q20 numbers was resilient, thanks to a strong pick up in Mar 2020. We are confident this improving trend will continue in 2Q-4Q20E, driving re-rating further (esp. when Joyoung is undergoing a strong re-rating already). The stock is trading at 16x FY21E P/E, still attractive (vs China/ Int’l peers’ avg. of 21x/ 19x). JS Global continues to be our top pick in the home appliance space.
- Joyoung’s 1Q20 sales/ NP att. fell by only 5%/ 10% YoY, inline and outperforming in the industry. Joyoung’s sales/ NP att. growth in 1Q20 was far better than its small appliances peers, such as Midea’s -23%/ -21% and Supor’s -35%/ -41%. We believe it was driven by the remarkable online growth in Mar 2020, where robust demand for home cooking and cleaning/ sanitizing met the resumption of logistic capacity. Star products include: 1) blender, 2) air fryer, 3) steam mop and 4) other “bacteria killing” gadgets.
- Joyoung’s outlook in FY20E remains positive. The Company had revised down its FY20E sales/ NP att. target to 11%/ 9% (from 17%/ 15%), indicated by employees’ incentive scheme. We believe this target is now more realistic and is positive to maintain the staff’s morale. Moreover, with the strong momentum in Mar-Apr 2020 (esp. online), we do find it achievable, and now forecast Joyoung’s sales growth in 2Q/ 3Q/ 4Q20E to be 11%/ 19% / 26%.
- SharkNinja to gain more market shares, therefore we remain optimistic in long run. Offline demand in US/ EU must have been hit hard in Feb-Apr 2020, however, by referencing to the case in China, SharkNinja should eventually gain more market shares. As long as situation stabilized by 2Q or even 3Q20, we believe organic growth can be resumed in mid to long run.
- GP margin can be boosted in the falling raw material environments. Oil price (both WTI and Brent) has fallen by ~66% YTD. This, in our view, could drive down overall production costs of metals and plastics, and hence providing room for GP margin improvements in 2H20E and FY21E.
- Maintain BUY and raised TP to HK$ 9.97. We fine-tuned FY20E/ 21E EPS estimates by -0.2%/ 4%, to factor in sales cut for SharkNinja but increases for Joyoung. We maintain BUY but lifted TP to HK$ 9.97, as we use 19x FY21E P/E (raised from 16x FY21E P/E). Valuation is still attractive at 16x FY21E P/E, comparing to its China/ Int’l peers’ average of 21x/ 19x FY21E P/E.
