Maintain BUY and lifted TP to HK$ 19.57, based on 28x FY21E P/E (vs. prev. 20x FY21E P/E), as we argue SharkNinja deserves a re-rating thanks to the more sustainable growth from its new and successful product cycle. We are also confident on Joyoung‘s resilient growth in 4Q20E and FY21E. The stock is trading at 24x FY21E P/E, still attractive (vs China/ Int’l peers’ avg. of 30x/ 23x) in our view. JS Global remains our top pick in the home appliance space.
- Joyoung’s 3Q20 sales/ NP att. grew by 22%/ 7% YoY, 3% higher/ 12% lower than CMBI est. Joyoung’s 3Q20 sales growth was impressive, which grew 22% YoY to RMB 2.5bn, 3% higher than our estimates. It was, in our view, due to strong e-commerce demand even after offline stores re-opened. However, Joyoung’s 3Q20 NP att. only grew by 7% YoY to RMB 226mn, 12% below our estimates. We attributed weaker GP margin (at 28.4% vs 32.3% in 3Q19) to rising raw material costs, higher online mix and retail discounts.
- However, we are still optimistic on 4Q20E. Even though Joyoung’s NP att. only grew by 4% in 9M20E, we are still convinced on a reasonable rebound in 4Q20E as the management reiterated its FY20 guidance of at least 9% YoY growth, a minimal rate to unlock their stock incentives. Moreover, according to All Cloud View, small appliances industry sales growth (including ovens, blenders, cooker, vacuum cleaner, etc.) had no signs of deceleration in Sep 2020 (vs Jul-Aug) for both online and offline. Hence, we maintain rapid sales/ NP att. growth of 25%/17% YoY for Joyoung in 4Q20E.
- SharkNinja’s growth in 2H20E should still be intact. We are still confident on SharkNinja to deliver an upbeat growth in 2H20E, as its increasingly popular new products are likely to gain more market shares. Also, 1) the robust China home appliances export growth (36%/ 39%/ 43% YoY in Jul/ Aug/ Sep 2020), according to China Customs, and 2) recent upward revisions of iRobot’s 2020 sales growth guidance (from 0%-LSD to 12%-13%) should be positive signs of rising demand for small home appliances in US and Europe.
- We Maintain BUY and raised TP to HK$ 19.57. We fine-tuned FY20E/ 21E/ 22E EPS estimates by -4.1%/ -0.9%/ +0.3%, to factor in better Joyoung sales growth but slightly lower GP margin and dilutions from recent shares placement. We maintain BUY and lifted TP to HK$ 19.57 as we use 28x FY21E P/E (raised from 20x). Valuation is still attractive at 24x FY21E P/E, comparing to its China/ Int’l peers’ average of 30x/ 23x FY21E P/E.
