In those years, Turkey Noodles, White Rabbit, and Lao Ganma started to cross-border and launched their own makeup products. Netizens lamented that time-honored brands are so popular!
Recently, Xiaomi , which has emerged in the mobile phone industry in terms of performance and price, has launched a gel pen that can write 170,000 words after experiencing various cross-border products such as bags and power strips. It has two characteristics. First, it looks good; second, it is very cheap. You can buy 10 pieces for 9.99 yuan.
Chenguang Stationery (603899.SH), which has been working in the stationery industry for many years, never expected that a Xiaomi that makes mobile phones would actually want to compete with me for business? I don’t know what Lei Jun is thinking about?
Although the wolf is coming, the stock prices of M&G Stationery are going their own way. Since the beginning of this year, the stock price has increased by 40%. Even though the market correction of A shares has been considerable since April, and most companies with good early gains have seen significant declines, M&G Stationery has remained unmoved and continued to rise. If you look at
over a longer period of time, since its listing on January 27, 2015, the stock price has increased by more than 410%, which is equivalent to an increase of more than 4 times in 4 and a half years. It is definitely a big bull stock. However, in these 4 years The market remains motionless.
(Quote source: Futu Securities)
The market fell, but the stock price of M&G Stationery was very strong. Why is it so good? Below, let’s clear away the fog and find out.
1. Morning Light Stationery Do you know the geometry?
Chenguang Stationery , headquartered in Shanghai. The founder of , Chen Huxiong, got involved in the field of stationery in 1989. In the first 7-8 years, he worked hard as an agent, mainly representing stationery from South Korea or Taiwan. Later, after experiencing the financial crisis in 1997, most of the suppliers of M&G Stationery went bankrupt. Later, they developed upstream and opened manufacturing factories.
is such a small stationery field, but M&G is able to counterattack and take the lead. At present, Chenguang Stationery ranks first in the domestic market share. It produces a wide variety of products, reaching 600-700 categories, and 6000-7000 new products. In the small stationery industry, under the leadership of M&G, Chinese brands account for 80% of the market share. Even Sanford, the world's largest stationery production giant, failed after entering the Chinese market for 13 years, including the second largest manufacturer. ——The fate of BIC is the same.
When it comes to stationery, our intuitive feeling is that it is an industry with low threshold and low gross profit. Actually, this is not the case. The tip of a writing pen is actually not much different from the precision parts in a watch. For example, writing a distance of 1,500 meters requires the pen tip to rub against the paper 300,000 times, so the accuracy is very high. Manufacturers like Chenguang imported Swiss precision machine tools for production.
Chenguang's main business is divided into three categories, including writing instruments, student stationery and office stationery. The corresponding proportions of revenue in 2018 were 22.81%, 21.78%, and 54.07% respectively. Except for the relatively low gross profit margin of office stationery, the gross profit margin of the other two categories is still very high. According to the 2018 financial report, the gross profit margin of writing instruments is as high as 34.83%, and has increased year by year. The same is true for student stationery, with a gross profit margin of 33.5%.
Next, let’s take a look at why M&G’s stock price performs so well? The main reason behind this is the beautiful performance.
In 2018, Chenguang Stationery ’s revenue was 8.535 billion yuan, a year-on-year increase of 34.26%. The compound annual growth rate in the past five years is 29.42%. In terms of net profit attributable to the parent company, it was 807 million yuan in 2018, a year-on-year increase of 27.25%, and the five-year compound annual growth rate was 23.62%.
In 2018, Chenguang's net cash flow from operating activities was 828 million yuan, even more than the net profit attributable to the parent company. This shows that net profits have grown in real terms over the years, rather than the net profits of some A-share companies that adjust accounting items to whitewash their performance.
2. Where is the future of M&G Stationery ?
In the field of student stationery, M&G Stationery and Zhencai are the main players. Zhencai submitted an IPO prospectus in 2014 and terminated it in 2016. The overall net profit margin was only 2.83%, and the revenue growth rate was lower than that of M&G.
Other brands, including Hobbies, Baixue , and Beifa , are mainly export-oriented. Other domestic brands such as Deli, Qixin, and Guangbo mainly focus on office stationery. In addition to Deli, which has certain C-end sales strength, Qixinhe Guangbo retail terminal sales are very small. In recent years, small and medium-sized stationery manufacturers have gradually proposed that industry competition is relatively relaxed.
So, how has Chenguang grown and developed step by step over the years? The main secret lies in sales channels.
In Chenguang headquarters, there are only more than 60 sales staff in total. How do they manage a huge distribution team? Within the company, this model is called “investment at all levels and sharing at all levels.” To put it simply, the 60 people at the headquarters are responsible for training and managing first-level dealers at the provincial level, and then the provincial-level dealers will cultivate second-level dealers, and then to the county-level or township markets, one layer at a time, and the provincial level. The following dealers have greater freedom.
Because China is a big country, the investment in going deep into the third- and fourth-tier markets will be very large, and company management is also very troublesome. Using this pyramid-like distribution model of "investing layer by layer, sharing layer by layer", the input-output is relatively high.
According to 2018 financial report data, M&G currently has 35 first-level partners, second- and third-level partners in nearly 1,200 cities across the country, and more than 76,000 retail terminals. Now you know why M&G Stationery sells so well! M&G covers 80% of offline schools and many communities. M&G stationery stores can be found everywhere.
At present, Chenguang regional distribution model accounts for about 90% of the entire sales. There are also some KA sales, overseas sales, office direct sales, and direct flagship store sales models.
Offline distribution channels can be said to be M&G’s strongest moat. So, where will Chenguang’s continued growth come from in the future?
1. There is room for improvement in market share
It is reported that the retail value of cultural office supplies in 2017 was 366.1 billion yuan, with a year-on-year growth rate of 11%, which was slightly slower than in previous years. According to Tianfeng Securities estimates, based on 10% of total retail sales, the retail sales of writing instruments will be 36.6 billion yuan, the retail sales of student stationery will be 73.2 billion yuan (calculated based on 20% of the total retail sales), and the retail sales of office supplies will be 73.2 billion yuan. Sales volume is approximately 256.3 billion yuan.
Take the 36.6 billion writing instruments as an example. The corresponding factory caliber scale is 14.64 billion yuan. Chenguang Stationery has a market share of 12.21%. At present, there are more than 8,000 companies engaged in stationery production across the country, and there are even hundreds of Chenguang companies that produce counterfeit products. 90% of them have annual sales of no more than 10 million yuan.
According to data from Zhiyan Consulting, the CR5 of China's writing instruments market is 30.4%, of which M&G has the largest market share. During the same period, the CR5 of American writing instruments was 71.1%, and Newwell, the largest market share, has a market share of 29.1%.
In addition, taking the 73.2 billion yuan of student stationery as an example, the corresponding factory scale is 29.3 billion yuan, and the market share of Chenguang Stationery is only 5.57%.
Overall, in the field of student stationery, the leading market share is not concentrated, and there is still room for improvement.
2. The number of students and product prices have increased
At present, the enrollment rate of school-age children in China is as high as 99%, but the junior high school enrollment rate is about 90%, and the high school enrollment rate is 69%. As society attaches more importance to education, the enrollment rate is expected to continue to increase, especially in high school and university. Tianfeng Securities predicts that the number of people with academic qualifications and pre-school education will steadily increase in the next few years, from 255 million people in 2016 to 271 million people in 2023.
In 2017, there were 261 million students with academic and pre-school education, and 57 million non-academic education graduates. The average annual cost of stationery per student was about 230 yuan, which is a low level compared with developed countries. With China’s emphasis on and investment in education, there is still room for improvement in stationery purchasing costs.
Generally speaking, the market space for stationery is still growing, but the growth rate has slowed down. Everyone has noticed that, especially office workers after work are using more and more electronic offices, and students are also gradually turning to tablets for online learning.
In the future, Chenguang will encounter the above industry "difficulties" sooner or later, so now we are taking precautions and trying every means to increase our income.
Chenguang, which has always focused on offline distribution channels, has also begun to devote part of its energy to building online channels. In 2018, Chenguang achieved revenue of 230 million yuan on mainstream platforms such as Tmall, , JD.com and , which accounted for a relatively small proportion of total revenue.
Previously, Chenguang Stationery had tried to find new growth points outside the stationery field by increasing its holdings in subsidiaries and cooperating with brands such as Marie Dalgar. In March this year, M&G Stationery cooperated with M&G to launch a Sakura Story limited gift box during the cherry blossom season, which included M&G Sakura Hand Cream, M&G Sakura Book and Sakura Pen Set.
3. Epilogue
Another point is that M&G Stationery has no bank capital leverage, zero loans, and all operating funds are its own. This is almost non-existent in the stationery industry, and even extremely rare among A-share listed companies. It can also be said that the management of M&G Stationery is very conservative and low-key.
As the absolute leader in the industry, M&G still has a good say. We can see from the "cash/operating income received from the sale of goods and services" that it is greater than 1 for many years.
In the future, the small stationery industry will still have a pattern of constant strength and constant strength. M&G should still be able to reap dividends for a period of time, but at the same time, we must also pay attention to the "dilemma" of the industry.
