Wanhe Electric (002543): Third-quarter revenue under pressure to reduce profit margins, brighten channels, diversify channels, wait for flowers to open

Wanhe Electric (002543): Third-quarter revenue under pressure to reduce profit margins, brighten channels, diversify channels, wait for flowers to open

Event On October 25, 2019, Wanhe Electric released the third quarter report of 2019.

The company achieved total operating income of 47 in 2019Q1-3.

94 ‰, a decrease of 9 per year.

41%; net profit attributable to mothers4.

460,000 yuan, an increase of 20 in ten years.

93%; net profit deducted from non-attributed mothers3.

85 ppm, an increase of 21 in ten years.


In terms of quarters, the company’s Q3 revenue reached 12 quarters.

42 trillion, down 18 a year.

64%; net profit attributable to mothers1.

160,000 yuan, an increase of 25 in ten years.

93%; net profit deducted from non-return to mother 0.

68 ppm, a five-year increase of 5.


Brief Comment 1. Due to the downturn in the industry, 19Q3 revenue-bearing segmented companies achieved revenue 12 in the third quarter.

42 trillion, down 18 a year.

64%, a decrease compared to the first and second quarter.

In general, under the combined effects of the slowdown in macroeconomic growth, the severe externalities, and the serious expansion of land size policies, the demand for kitchen appliances is still at the bottom.

The total data of Zhongyikang’s omni-channel promotion shows that the retail sales of 19Q3 water heaters, range hoods and gas stoves are placed separately.

03%, 3.

30% and 1.


The offline pressure is higher than online. The data from Aowei Cloud Network shows that the retail sales of hoods and gas water heaters in 19Q3 dropped by 6 respectively.

67% vs. 8.


At the same time, from a structural point of view, the company ‘s kitchen appliance products have expanded significantly, or due to weak market growth, leading companies have mainly pushed for cost-effective products.

According to the data of Zhongyikang, the average price of Fangtai’s boss in 19Q3 dropped by about 3% and 5% respectively, which caused a diversion to subsequent echelon brands.

2. Profitability has risen against the trend, gross margin growth has increased, and expenses have increased during the period.

460,000 yuan, an increase of 20 in ten years.

93%; net profit deducted from non-attributed mothers3.

85 ppm, an increase of 21 in ten years.


Under the background of income pressure, the profit side rose steadily, mainly contributed by profitability boost.

The company’s comprehensive gross profit margin was 33 in 19Q1-3.

94%, an annual increase of 5.

33pct; Q3 single-quarter gross margin was 35.

57%, an annual increase of 2.1pct.

The improvement in gross profit margin is beneficial to the decline in raw material prices, reorganization, the company’s increase in the main thrust of high value-added products, continued optimization of product and customer structure, and improved cost control.

In terms of period expenses, 19Q1-3 company’s selling expenses expense was 17.

60%, an annual increase of 3.

21pct, mainly due to the increase in marketing costs, advertising costs and after-sales fees; Q3 single-season sales expenses20.

84%, an annual increase of 2.

36 points.

19Q1-3 Management expenses Expense 6.

19%, an annual increase of 0.

36 points; financial expenses 0.

25%; a year of decline of 0.

30pct is mainly due to the decrease in exchange losses and the increase in interest income.

3. The channels are diversified and the layout is increased. The third and fourth tier and hardcover markets are transforming the development of township economy and the sinking of the logistics network. The potential of the third and fourth tier markets is gradually emerging.

The company comprehensively expands the breadth and depth of channels, implements a diversified channel strategy from online to offline, and from cities to villages, tilts the channel focus to the secondary market, and actively embraces emerging channels such as engineering mining.

The 19H1 company’s traditional channel is targeted at 13.

55 ppm, a 10-year increase2.

77%; e-commerce channel is 5.

27 ppm, an increase of 4 per year.

09%; the channel of collective mining project is preset to 1.

23 ppm, a 72-year increase.

32%, of which the cooperation with Evergrande Real Estate reached 3070.

190,000 yuan, an increase of 771 in ten years.


As for the sinking of outlets, as of June 2019, the company’s offline sales outlets exceeded 16,000.

The company continues to increase the development of experiential stores, entering 328 controllable KA stores such as Gome, Suning, and Five Star.

At the same time, it has fully empowered the third- to sixth-level market channel outlets, 佛山桑拿网 and completed the construction of 832 outlets through specialty stores, building material cabinet stores, and electronics specialty stores.

In terms of community marketing, the number of Wanhe official mall stores increased by 1,763, for a total of 3,300.

In terms of penetration rate, the company’s primary market coverage rate is stable at 100%, the secondary market coverage rate is over 98%, and the third-to-sixth market coverage rate has increased significantly.

4. Inventories, accounts receivable fluctuated slightly, and operating cash flow increased dazzlingly. In 19Q1-3, the company’s inventory decreased compared with the same period in 18, and the company’s inventory was 10 at the end of the third quarter.

380,000 yuan, a decrease of 3.

97%, inventory turnover days increased by 13 days to 103 days.

In terms of accounts receivable, the accounts receivable of the company in 19Q1-3 increased by 6 compared with the same period last year.

66% to 7.

4.4 billion, 38 days of turnover, 4 days more than the same period last year.

The operating cash flow was significantly improved, and the company achieved operating cash flow in 19Q1-3.

06 trillion, an increase of 218 over the same period last year.

75%, of which Q3 achieved operating cash flow in a single quarter3.

55 ppm, which was 931 in the past.
54%, mainly due to a substantial increase in the repayment of cash in the current period, due to a reduction in cash paid for the purchase of consolidated goods.

Investment suggestion: The company is the first domestic brand in the field of heating. The construction of multiple channels is steadily advancing. The third- and fourth-tier markets are sinking and increasing, actively embracing emerging channels such as engineering mining, and jointly expanding the variety of IP.
We expect the company to achieve revenue of 63-2019 respectively.

83, 66.

48 ppm, which varies by -7 each year.

68%, 4.

15%, realizing net profit attributable to mother 5.

90, 6.

3.8 billion, an increase of 20 each year.

62%, 8.

22%, corresponding PE is 12 respectively.

33X, 11.

40X, maintain the company’s “Buy” rating.

Risk reminders: Economic growth continues to be under pressure; trade environment is deteriorating; raw material prices fluctuate sharply.