Investment Summary
Global Industry Leader with Trusted Household brands
The Company has the ability to create and define market segments. Through in-depth understanding and accurate prediction of consumer needs, the Company continues to launch original products, create new market needs, diversify product categories, and establish a diversified and huge product portfolio. For example, the Company successfully launched a new series of wall breakers in China in 2016, and continued to extend customized product functions, including heating, mute, and no-clean functions, thus opening up the wall breaker market through this new product series, and in 2018 The annual sales quickly reached 196.9 million US dollars. The Company's Shark products have upgraded and transformed the American cleaning appliance industry and maintained the number one market share of the vacuum cleaner industry and the second market share of sweeping robots in the United States. It can be seen that the Company continues to maintain business growth through a diversified and innovative product portfolio, continuously launches new categories, increases market share, leads consumption upgrades, and is always at the forefront of future smart home products.
A disruptor of introducing innovative products create new demand
The Company has the ability to continuously innovate through their intense focus on consumer needs, their ability to assess and predict future market development and consumption trends, as well as their continuous pursuit of technology, high performance, functionality and ground-breaking appealing product design. By combining their consumer-centric product innovation and market-leading consumer demand generation, they have been able to create new market segments and disrupt existing categories.
Superior Distribution Channel Management
The Company occupies a leading position in the two largest small home appliance markets in the world, China and the United States, and has established a channel strategy tailored to local conditions and a complete omni-channel sales, marketing and distribution network based on the different market characteristics of each region.
Valuation and Investment Recommendation
As of the closing price on Mar 11, the Company's trailing P/E was 83.08x. We believe that based on the Company's sound fundamentals and it's brand advantage. We give the Company a target price to earnings ratio of 28.0x in 2021. We expect the Company's 2020/2021/2022 earnings per share to be USD$ 0.61/0.91/1.29, and 12 months target price of HK$25.00, corresponding to the P/E ratio of the earnings per share for 2020/2021/2022 is 38.68x/27.47x/19.41x. Accumulate rating is given for the first coverage. (Current price as at 11 March 2021)
Company profile
JS Global Life was established in 1994 and is a global leader in high-quality innovative small home appliances. The Company's success is based on deep insight into consumer needs, and excellent product innovation and design capabilities supported by a global R&D platform, high brand participation driven by marketing advantages, and a highly penetrated omni-channel distribution network. We continue to create new products and add new categories. With the help of a diversified product portfolio, we cultivate the market and stimulate consumer demand, create market expectations for new products to lead the category, and reshape the consumption style and family life of global consumers. With multiple trusted market-leading brands: Joyoung, Shark and Ninja, the Company have maintained a leading position in the global small home appliance market.
According to the Frost & Sullivan Report, in terms of market share, the Company ranked sixth in the world among all small appliance companies in 2018, third among small appliance companies, and the two largest companies in China and the United States. The small home appliance market also has a leading market position.
Investment Highlights
Global Industry Leader with Trusted Household brands
The Company has the ability to create and define market segments. Through in-depth understanding and accurate prediction of consumer needs, the Company continues to launch original products, create new market needs, diversify product categories, and establish a diversified and huge product portfolio. For example, the Company successfully launched a new series of wall breakers in China in 2016, and continued to extend customized product functions, including heating, mute, and no-clean functions, thus opening up the wall breaker market through this new product series, and in 2018 The annual sales quickly reached 196.9 million US dollars. The Company's Shark products have upgraded and transformed the American cleaning appliance industry and maintained the number one market share of the vacuum cleaner industry and the second market share of sweeping robots in the United States. It can be seen that the Company continues to maintain business growth through a diversified and innovative product portfolio, continuously launches new categories, increases market share, leads consumption upgrades, and is always at the forefront of future smart home products.
The Company develops localized small home appliance products for different international markets. The Company's business is rooted in the two largest small home appliance markets in the world, China and the United States, and expanded to other developed markets around the world. As an industry leader, the Company has successfully created many market blank categories and maintained a leading market share in the main product categories. For example: In the Chinese market, in terms of retail sales in 2018, the Company ranked third in the small home appliance market. In the US market, the Company ranked second in the small home appliance market in terms of retail sales in 2018. It can be seen that the Company continues to maintain business growth through a diversified and innovative product portfolio, continuously launches new categories, increases market share, leads consumption upgrades, and is always at the forefront of future smart home products.
A disruptor of introducing innovative products create new demand
The Company have the ability to continuously innovate through their intense focus on consumer needs, their ability to assess and predict future market development and consumption trends, as well as their continuous pursuit of technology, high performance, functionality and ground-breaking appealing product design. By combining their consumer-centric product innovation and market-leading consumer demand generation, they have been able to create new market segments and disrupt existing categories.
They have research development centers around the globe located in the United States, China, and the United Kingdom. This global platform powers their product development capabilities by encouraging collaboration and knowledge sharing across locations and categories. They enable apply core technologies and engineering innovation across product categories to shorten their product development cycle.
The Company has the ability to create and define market segments. Through in-depth understanding and accurate prediction of consumer needs, the Company continues to launch original products, create new market needs, diversify product categories, and establish a diversified and huge product portfolio. For example, the Company successfully launched a new series of wall breakers in China in 2016, and continued to extend customized product functions, including heating, mute, and no-clean functions, thus opening up the wall breaker market through this new product series, and in 2018 The annual sales quickly reached US$ 1.96 million. The Company's Shark products have upgraded and transformed the American cleaning appliance industry and maintained the number one market share of the vacuum cleaner industry and the second market share of sweeping robots in the United States. It can be seen that the Company continues to maintain business growth through a diversified and innovative product portfolio, continuously launches new categories, increases market share, leads consumption upgrades, and is always at the forefront of future smart home products.
Superior Distribution Channel Management
The Company occupies a leading position in the two largest small home appliance markets in the world, China and the United States, and has established a channel strategy tailored to local conditions and a complete omni-channel sales, marketing and distribution network based on the different market characteristics of each region.
In China, the Company adopted a new consumer-centric retail business model in the small home appliance industry. Consumers participate in product development by providing feedback, which has become part of the overall consumer experience, and retailer terminals have expanded from independent individuals online and offline to an integrated omni-channel distribution model. The Company has been deeply cultivating various regional markets for many years, has accumulated rich experience and local resources, and has long-term and in-depth cooperation with key distributors and retailers, and has established an extensive dealer network and sales points nationwide. Through the Company's unique experiential offline marketing techniques, consumers can try products in person and get a close-up experience of how the Company's innovative products can improve their lives.
Financial Analysis
Revenue analysis
The Company's total revenue for 2017/2018/2019 to be US $1.56/2.68/3.02 billion. We expect the Company's forecasted total revenue for 2020/2021/2022 to be US$ 4.02/5.08/6.33 billion respectively. The year-on-year growth was 33.3%/26.4%/24.6% respectively.
Costs and expenses analysis
The main cost of the Company is the cost of sales, and the main expenses are sales and marketing expenses, and general and administrative expenses. In 2019, they were US$ 1.89/0.51/0.42 billion, accounting for 63%/17%/14% of revenue. We expect the Company's gross profit margin to be 45.3%/43.8%/44.5% in 2020-2022. We believe that sales and marketing expenses and general and administrative expenses will maintain its revenue share. Based on the above, we estimate that the operating costs of the Company in 2020-2022 will be US$ 3.34/4.2/5.13 billion.
Valuation
As of the closing price on Mar 11, the Company's trailing P/E was 83.08x. We believe that based on the Company's sound fundamentals and it's brand advantage. We give the Company a target price to earnings ratio of 28.0x in 2021.
We expect the Company's 2020/2021/2022 earnings per share to be US$ 0.08/0.12/0.17, and 12 months target price of HK$25.0, corresponding to the P/E ratio of the earnings per share for 2020/2021/2022 is 38.68x/27.47x/19.41x. Accumulate rating is given for the first coverage. (Current price as at 11 March 2021)
Risks
1) The Company's sales volume fell short of expectations
2) Another outbreak of the epidemic impacts production and sales
3) The global economic development is not as expected
Financial statements
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