Zhongshun Jierou (002511) 2019 Third Quarterly Report Review: Q3 Revenue Restructuring Gradually Generates Worry-Free Growth

Zhongshun Jierou (002511) 2019 Third Quarterly Report Review: Q3 Revenue Restructuring Gradually Generates Worry-Free Growth

The short-term disturbance caused Q3’s income growth to slow down. After the price policy adjustment in September, long-term income growth was 18% -20% with strong certainty.

The continuous downward price of pulp has released performance elasticity, the “Jierou” product structure has continued to upgrade, and “Sun” has promoted the expected good future growth, resulting in worry-free growth.

   Q3 revenue growth slowed, and performance growth slightly exceeded expectations.

The company achieved revenue of 48 in the first three quarters of 2019.

2 billion yuan, +18 per year.

11%; net profit attributable to mother 4.

380,000 yuan, +39 for ten years.

96%, basic profit returns 0.

34 yuan.

The company achieved 16 in 19Q3.

47 trillion, ten years +10.

21%, in line with expectations; net profit and growth rate attributable to mothers1.

63 ppm / 44.

16%, slightly ahead of our three quarterly forward-looking forecast (yoy + 35% -40%).

   Short-term disturbances have slowed Q3 revenue growth, and earnings growth is expected to be worry-free.

In 19Q3, company revenue increased by only 10 per year.

21%, dragged down by two factors: 1) during the downturn of 19Q3 pulp prices, regional small and medium-sized brands’ price promotions have impacted on the company’s product sales; 2) the adjustment of the procurement policy of an e-commerce platform caused new additions in 19Q3 to reduce the company’s e-commerceChannel growth 都市夜网 has affected (single season growth rate dropped from 60% + to about 30%).

The adjustment of factory prices and the release of expenses in September have returned to normal levels of revenue growth, and Q4 is generally the peak season for sales. It is expected to achieve 18% -20% revenue growth with a high degree of certainty.

In terms of net profit, the net profit attributable to the parent was 0 in 18Q4.

9.5 billion, the base of the overall average.

And the continued decline in pulp prices is conducive to the company’s continued improvement in profitability in 19Q4. It is judged that the net profit margin of 19Q4 remains above 9% without pressure. The profit growth of 70% in the single quarter of 19Q4 is expected, and the performance growth is not worrying.

   The gross profit margin continued to be repaired, the expense ratio went up month-on-month, and the increase in net profit margin was expected to remain above 9%.

Benefiting from the sharp drop in raw material prices, the company’s comprehensive gross profit margin for the first three quarters / 19Q3 was 38.

29% / 41.

37%, Q3 increased by 2 compared with the previous quarter.

14pcts; With the continuous repair of gross profit margin, the company strengthened its expenses, and Q3’s total expense ratio was +1 from the previous quarter.

57% to 29.

22%, while total expenses in the first three quarters were 26.

86%, ten years +1.

32pcts; the company’s net profit for the first three quarters was 9.

08%, an annual increase of 1.

91pcts, Q3 net margin is 9.

89%, an increase of 0 from the previous month.

61pct, Q4 net margin is expected to exceed 10%.

   Accounts payable increased significantly, and cash flow continued to improve.

The average price of wood pulp Q1 / Q2 / Q3 decreased by 8 from the previous month.

03% / 8.

88% / 14.69%. During the period when the pulp price is down, the company purchases raw materials in the form of “first payment and later payment”, and the bargaining power has been significantly improved. The company’s account receivables in the first three quarters reached 8.

76 ppm, a ten-year increase4.

9.6 billion.

At present, the company’s stocking of raw materials is still at the expected level. Profit recovery has driven continuous improvement in cash flow, and net operating cash flow has increased in the first three quarters.

8.2 billion.

   The product structure is continuously optimized, and new product promotion is expected.

The company’s proportion of high gross profit products continued to increase. The three major series of face, lotion and natural wood accounted for 68% of revenue in the first three quarters, reaching 70% of expectations.

The Face series revenue contributed over 50%, and the emulsion series penetrated e-commerce and mother-to-child channels grew rapidly, with the growth rate of nearly 100% in the first three quarters.

The company launched the “Sun” brand white paper in July, based on the existing channels to seize the low-end and mid-end markets. E-commerce sales performance is expected.

19Q4 will be rolled out in offline channels nationwide, and is expected to be heavy next year.

   Short-term downward pressure on pulp prices still exists, and the estimated gross profit margin is raised to 39.


19Q3 pulp price continued downward trend. At present, internal port inventory is still at a high level. Poor inventory destocking reflects weak downstream demand. In the short term, there is still downward pressure on pulp prices.

The company plans to lock in costs by storing low-cost raw materials in the process of bottoming pulp prices.

Assuming an exchange rate of 7, the price of pulp in the outer disk will drop by 20%. Considering the potential channel profit, it is expected that the gross profit margin will return to 39 in 2019.

8%, higher than the previous estimate of 37.

3%, an increase of 5 per year.


   Risk factors: fluctuations in raw material prices; new product sales, channel expansion, and capacity releases are less than expected.

   Profit forecast and investment rating.

The short-term disturbance caused Q3’s revenue growth to slow down, and Q4 is expected to recover to more than 20%. The decline in pulp prices will continue to release performance elasticity, thereby achieving growth without any problems.

In the medium to long term, the “Jierou” brand structure is continuously upgraded, the mid-to-low end of the “Sun” brand layout is escorting future growth, and the personal protection category is also steadily advancing.

Based on this, we raised our 2019-2021 net profit forecast to 6.

30 billion / 7.

4.9 billion / 8.

94 trillion, corresponding to 0 EPS.



68 yuan (previous forecast was 0.



66 yuan), maintaining 16.

5 yuan target price and “Buy” rating.