Rongtai Health (603579): Affected by the economic cycle, the retail market of massage chairs is growing rapidly
Company dynamics The company’s recent situation and data tracking show that the massage chair online market growth track, the company’s flagship store sales performance is weak.  Comment on the growth rate of the online market for massage chairs: 1) Taobao data shows that Taobao’s stock price in the 2Q19 massage equipment industry rose by + 14%, and although there were 618 e-commerce festival promotions in June, the industry was sometimes only + 3%.The massage chair in the massage equipment industry has a higher sales rate and a more significant increase due to the higher unit price. It gradually replaced 1% in 2Q19 and replaced 20% in June.  2) According to customs data, the number of exports of the massage appliance industry in the first five months of 2019 continued to decline by 4%, and the export value increased by 11% each year.Compared with 2018, the number of exports increased by + 5%, and the export value exceeded 杭州夜网论坛 + 15%.  1H19 company ‘s domestic sales online performance is weak: 1) Taobao data monitoring, 1Q19, 2Q19 Rongtai Tmall self-operated stores fell by -13%, -5% respectively. Although sales in the second quarter improved compared with the first quarter, the performance was stillLagging behind the industry, the sales scale and growth rate also lags behind Aojia’s Tmall flagship store.2) The proportion of the company’s low-priced massage appliances has increased, resulting in 1Q19 and 2Q19 shops’ average transaction prices staying at 1% and 33%.3) The company uses the Momoda brand to sell 4000-6000 yuan cost-effective massage chairs online. This price segment is currently widely used and growing rapidly. The 1H19 Momoda flagship store has a total of 2.48 million yuan, which is close to Rongtai’s official self-operationStore sales (329 重庆耍耍网 million).  2H19 results are expected to improve: 1) In 2018, the company did not launch new products with competitions, BodyFriend orders appeared in 2H18 and asked to order alternative competitive products.  The company released new products in March 2019, and we expect to receive order growth in the second half of the year.2) The revenues of 1Q18 and 2Q18 companies exceeded + 65% and + 39%, respectively, and the bases above 1H19 were high; the revenues of 3Q18 and 4Q18 companies exceeded + 15% and -16%, which are at least the base number for 2H19.  It is recommended to consider that the company’s internal sales business is still under pressure, and lower its EPS forecast for 2019/20 by 10% / 15% to 1.86 yuan / 2.17 yuan.We maintain our Neutral rating and lower our target price by 16% to 33 due to lowered earnings forecasts.50 yuan, corresponding to 18x / 15x 2019 / 20e P / E, compared with the current breakthrough breakthrough space of 12%.The company currently expects 16x / 14x 2019 / 20e P / E.  Risks Exchange rate fluctuation risks, rising raw material cost risks.