Boss Appliances (002508) First Coverage Report: Period before crossing to ceiling

Boss Appliances (002508) First Coverage Report: Period before crossing to ceiling
Growth resumed: The company’s compound revenue growth rate for 2010-2018 was 25.17%, high-end brand positioning + grasp of channel dividends are the two key factors across the cycle.① Branding: Positioning high-end, taking the lead in mining consumers ‘appeal for suction and proposing the concept of “big suction”, while differentiated positioning is continuously coordinated and strengthened on the marketing side to seize consumers’ minds.②Channel layout: In the early stage, through the KA channel, the layout of the specialty store channel achieved rapid growth. In 2012-2014, the precise layout of the e-commerce channel passed through the real estate cycle. From 2014 to 2017, the third-tier and fourth-tier channels were implemented by replacing agents and establishing urban 厦门夜网 subsidiaries.sink.  Industry space: Kitchen electric ceiling is far from reaching the top.① Traditional smoke stove: at least double the space.From the perspective of inventory, the number of urban / rural smoke stoves is expected to increase from 79/26 units per 100 households to 95/60 units.  And the smoke stove and ice washing have the attributes of one household and one machine. Static forecast is that the sales volume of the smoke stove during the year is expected to increase from 17 million to 40 million.② Emerging categories: The penetration improvement cycle has just begun.  Dishwasher / steam-boiler all-in-one products currently have less than one per household. If the supporting rate reaches 30% in the future, the corresponding space can reach 12 million units per year.  Company’s Breakthrough: The rise of engineering channels will help the company cross the cycle again.The toB attribute of engineering channels places higher requirements on the comprehensive capabilities of manufacturers such as brand power, cash flow capabilities, and service capabilities.The company’s engineering channel market share is as high as 40%.Decisions on the evaluation of engineering channels, scarcity of high-end brands, reduced costs and better supporting services are the company’s winners.It is worth mentioning that in the long run, kitchen appliances are still retail attributes.Only companies with product development and innovation capabilities can support higher brand premiums.  How to understand the market’s concern about company profitability?①Retail channels: The retail terminal prices are still lowered due to changes in product structure, which are caused by corporate channels.The 5-time markup rate is relatively high, and there is still room for maintaining the ex-factory price increase but compressing the retail price.②Engineering channel: gross profit content but no more selling expenses, and considering the real estate developers’ high-end adjustment of kitchen appliances structure in the future, there is room for improvement. If the engineering channel accounted for 30% in the future, the impact on the company’s net profit marginOnly about 1.5pct or so.  Earnings forecasts and investment advice.It is estimated that the company’s net profit attributable to its parent in 2019-2021 will be 15 respectively.95/17.90/20.07 billion, an increase of 8.3% / 12.2% / 12.1%.The estimated changes in the kitchen appliance industry in Fupan and with reference to the company’s future growth expectations, we believe that the industry’s future estimated hub is 15-20 times the dynamic PE level.Taking into account the recovery of real estate completion in 2020, the company’s fundamentals will continue to improve. It is expected that the company will reasonably estimate that it will be 20 times the PE in 2020, covering it for the first time and giving it an “overweight” rating.  Risk warning: Real estate completion is less than expected; industry competition is intensifying.