RLX TECHNOLOGY(RLX.US)：STRONG 1Q21 RESULTS WITH SOLID 2Q21 OUTLOOK

RLX released strong 1Q21 results and gave a solid outlook for 2Q21.
Retail network and production capacity expansion continues to fuel future growth.
Maintain BUY with TP of US$30.00.
Strong 1Q21 results: RLX delivered 48.2% QoQ growth in 1Q21 revenue to RMB2,399mn, and 45.6% QoQ growth in non-GAAP net profit to RMB611mn; both are slightly ahead of the company’s prior guidance. The strong fundamental growth was largely driven by rapid store expansion – from less than 10,000 stores in 4Q20 to around 15,000 in 1Q21. The company also guided for RMB2,850mn revenue and at least RMB720mn non-GAAP net profit in 2Q21. If it delivers on the guidance, 1H21 revenue and non-GAAP net profit would reach RMB5,249mn and RMB1,331mn, respectively, putting the company well on track to hit our full-year forecasts of RMB10.6bn in revenue and RMB2.6bn in non- GAAP net profit.
Store expansion may slow in 2H21; expect more investment in consumer
interactions: RLX’s store expansion in 1H21 is well ahead of the company’s original target (brand store count to reach 15,000 by end-2021) partly due to its strategic focus on maintaining strong competitiveness. We estimate RLX will reach 20,000 brand stores by end-1H21 and store expansion may slow down in the second half to stabilize single-store sales. RLX’s 1Q21 gross profit (GP) margin expanded to 46%, from 43% in 4Q20, mainly as a result of it lowering sales subsidies to retail stores. Non-GAAP sales & marketing expense increased to 7.1% of revenue in 1Q21 from 4.5% in 4Q20 due to increased investment in consumer-related activity. We expect the 46% GP margin and 7-8% sales & marketing expense ratio are likely to be maintained in the near term.
New factories under construction to cope with increasing demand: RLX management
announced that two more joint factories (where RLX provides facilities and equipment, and supplier partners provide labor) are under construction to provide additional production capacity for future growth. Management believes the relationship with its largest supplier remains very stable and continuous improvement in supply chain management should help secure sufficient supply for RLX’s growth.
Maintain BUY and TP of US$30: We keep our EPS forecasts unchanged, along with our BUY rating and TP of US$30 (based on 1.8x 2021E PEG, implying 120x 2021E P/E). Key risks include: Policy implementation, health risks associated with e-vaping, negative press, product safety issues, competition and supplier concentration.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。