Maintain BUY and lifted TP to HK$ 34.38, based on 30x FY22E P/E (rolled over from 30x FY21E P/E), as we are still highly confident on SharkNinja’s stellar growth in FY21E. The stock is trading at 26x/ 22x FY21E/ 22E P/E, which is still attractive (vs China/ Int’l peers’ avg. of 30x/ 22x FY22E P/E) in our view.
- FY20 results beat even with profit alert. JS Global FY20 net profit surged by 372% YoY to US$ 402mn, in-line with profit alert, but sales/ adjusted net profit are 13%/ 51% above BBG est.. This strong results was due to: 1) stellar sales growth from SharkNinja in US and EU (UK sales doubled and taken over Dyson as #1), 2) significant operating leverage (stable increase in staff, R&D, D&A expenses), and 3) one-off gains from property sales and financial assets.
- Momentum sustained into 1Q21E. Management highlighted the robust growth momentum for SharkNinja/ Joyoung in 2H20/ CNY 2021 will sustain into 1Q21E, with a fairly healthy channel inventory.
- FY21E outlook remained upbeat. Despite potential high base, management is still confident on a 10%+/ 20%+ YoY sales growth for Joyoung/ SharkNinja in FY21E, thanks to: 1) excellent ramp up of new products launched last year (e.g. Shark VERTEX, Shark VACMOP, Ninja Foodi SMART GRILL, etc.), 2) regional expansion into EU (Ninja Foodi just started in UK and Shark into France and Germany in FY20) and Asia Pacific (e.g. Japan and Australia) and 3) category expansion into cookware (e.g. Ninja Foodi NeverStick cookware), personal care (e.g. Shark’s hairdryer), air and water purifiers, etc. We believe these products are competitive as the investments in R&D were strategic and meaningful.
- GP margin pressure to be offset by operating leverage. SharkNinja’s GP margin in FY21E may be under pressure (CMBI est. 33-35%), due to: 1) absence of tariff refund and resumption of tariffs, 2) potentially higher retail discounts in 2H21E and 3) raw material price inflations. But the Company is striving for their best to offset by: 1) shifting overseas production mix to ~35% of total (vs ~20% in FY20), 2) greater synergies in R&D and supply chain, with US$ 50mn+ savings expected, 3) better product mix and 4) potential ASP increases if necessary.
- Maintain BUY and raised TP to HK$ 34.38. We revised up FY21E/ 22E NP estimates by 26%/ 26%, to factor in faster SharkNinja’s growth and operating leverage. We maintain BUY and lifted TP to HK$ 34.38, based on 30x FY22E P/E (rolled over from FY21E). Valuation is still attractive at 26x/ 22x FY21E/ 22E P/E, vs China/ Int’l peers’ average of 30x/ 22x FY22E P/E.
