Maintain BUY and lifted TP to HK$ 22.64, based on 30x FY21E P/E (vs. prev. 28x FY21E P/E), because we are confident on SharkNinja’s stellar growth in 2H20E and the size of recent placement by its cornerstone investor was too small to be meaningful. The stock is trading at 25x/ 21x FY21E/ 22E P/E, which is still attractive (vs China/ Int’l peers’ avg. of 35x/ 26x FY21E P/E) in our view.
- Placement by cornerstone investor shouldn’t be a concern. According to Bloomberg, one of JS Global’s cornerstone investors - CM Kinder (owned by Citic Private Equity) had done a secondary placement of 22.6mn shares at HK$ 18.85 with 3.7% discount to its last price, reducing its stakes from 7.09% to 6.45%. We are not concerned about this because: 1) JS Global’s fundamental is still intact given an improving SharkNinja and a resilient Joyoung performance in 2H20E and 2) profit taking is reasonable as its share price had achieved 277% return after its IPO.
- SharkNinja’s business should be upbeat. We are highly confident that SharkNinja’s sales growth could accelerate in 4Q20E (vs 3Q20E), due to: 1) successful ramp up of new products launched in late 2019 (e.g. Ninja Foodi Indoor grills and Shark IQ Robot Self-Empty), 2) effective digital marketing on various social media (number of followers for Ninja is even higher than Shark on some platforms) and 3) robust China home appliance export growth (40%/ 62%/ 56% YoY in Oct/ Nov/ Dec), where the performance of small appliances is likely similar. We now forecast sales growth of 31%/ 20%/ 15% YoY in 2H20E/ FY21E/ FY22E, driven by: 1) new and more innovative products, 2) category expansion (e.g. Ninja cookware) and 3) regional expansion (e.g. France, Germany, Japan, Australia).
- Joyoung should remain resilient. According to All View Cloud, China small and large home appliances sales growth improved in 4Q20 (vs 3Q20) for both online and offline channel. We expect Joyoung to outperform and gain more market shares, indicated by its outstanding growth during the 2020 double 11 (Joyoung +71%/ Supor +67%/ Midea +59% YoY). We expect sales growth of 20%/ 13%/ 9% YoY in 2H20E/ FY21E/ FY22E.
- Maintain BUY and raised TP to HK$ 22.64. We revised up FY20E/ 21E/ 22E EPS estimates by 6%/ 9%/ 12%, to factor in a much faster SharkNinja’s growth with higher GP margin and a lower Joyoung GP margin. We maintain BUY and lifted TP to HK$ 22.64, based on 30x FY21E P/E (raised from 28x). Valuation is still attractive at 25x/ 21x FY21E/ 22E P/E, compared to its China/ Int’l peers’ average of 35x/ 26x FY21E P/E.
