Stock Code: 002242 Stock Abbreviation: Joyoung Report No.2020-004
Joyoung Co., Ltd. Abstract of Annual Report 2019Section I Important StatementsThis is an abstract of Annual Report 2019. Investors are kindly reminded to read the complete version of AnnualReport 2019 on the website which is designated by the China Securities Regulatory Commission to get completeinformation about operational results, financial statements and outlooks of the Company.In the event of any discrepancy between the abstract and the full document of annual report, the complete version inChinese shall prevail.
The Board has considered and approved the following dividend distribution plan for the Reporting Period: based on theCompany's total shares of 767,312,000 by the end of December 31, 2019 and deducting the 143, 000 restricted shares tobe repurchased and cancelled by the Company, that is, based on 767,169,000 shares, it is proposed that the Companyshould distribute a cash dividend of RMB 5.8 (tax inclusive) and stock dividend 0 share (tax inclusive) per 10 shares to allthe shareholders and should not convert capital reserves into share capital.
Section II Company Profile
1. Company Information
| Stock Abbreviation | Joyoung | Stock Code | 002242 | |
| Stock Exchange Where the Shares of the Company are Listed | Shenzhen Stock Exchange | |||
| Contact Us | Board Secretary | Securities Representative | ||
| Name | Wang Xuning (acting) | Miao Minxin | ||
| Address | No.760 Yinhai Street, Jianggan District, Hangzhou, Zhejiang Province | No.760 Yinhai Street, Jianggan District, Hangzhou, Zhejiang Province | ||
| Tel. | 0571-81639093 | 0571-81639178 | ||
| 002242@joyoung.com | 002242@joyoung.com | |||
2. Business or Product Review in the Reporting Period
In the Reporting Period, the Company continues to focus on the R&D, production and sales of smallhousehold appliances. Following the development strategy of “targeting and upgrading kitchen”, Joyoungis devoted to improving kitchen and ways to cook. As an American technology cleaning brand, Shark willcustomize more high-quality household cleaning appliances for Chinese families.The Company mainly operates independent R&D, design, sales and self-owned brands. Thanks topeople’s pursuit for a better and quality life and the promotion of consumption upgrade, consumerdemands for refined and user-friendly products of high quality continue to grow. In the Reporting Period,no major changes have occurred to the Company’s main business. The Company is in the mature periodwithout obvious cyclical features. Major product categories of the Company all rank top 3 across theindustry domestically in China.
3. Core Competence Analysis
(1) Brand Advantage
As a national brand advocating a healthy lifestyle, Joyoung has always been a leading brand in theindustry. Joyoung has been focusing on the researching, developing, producing and selling of kitchenappliances for healthy diet. After development of 26 years, the Company has accumulated plenty ofexcellent suppliers and distributors, strong R & D team and excellent industry reputation, establishing agood brand image in both the upstream and downstream, and moreover, in the industry. The Companyhas eventually managed to transform from a soymilk maker brand to a quality life solution provider insmall household appliances, and achieved the transformation and upgrade in both brand and strategy.
At present, the Company mainly offers categories including soymilk maker, cell-wall breaking highspeed blender, electric rice cooker, electric pressure cooker, electric stew pot, kettle, noodle maker, slowjuicer, induction cooker, water purifier, dishwasher, auto-wok, air fryer, oven, oven and more. Amongthem, main categories including soymilk maker, cell-wall breaking high speed blender, juicer, noodle
maker and air fryer rank top 1 in the market and other products also rank top 3 in the market.Established in Boston 1998, Shark, a brand that excels in cleaning technology, now ranks top 1 in thesales of cleaning appliances in the United States. Having entered the Chinese market in 2018, Shark haslaunched a variety of household cleaning appliances customized for Chinese families, including multi-flexvacuum, steam mop, WANDVEC, etc.
(2) Channel Advantage
The Company has been deeply involved in the small household appliance industry for many years,mainly adopting the distribution system with networks and customer resources all over the country. TheCompany offers customer-centric experience and scenarios, that is, to demonstrate products and foodmade with them to trigger impulsive consumption.In 2019, the Company has achieved robust development both online and offline. Upon the existing40,000 plus point of sales nationwide, the Company has been relentlessly optimizing its sales networkand actively exploring new retailing business. During the reporting period, dozens of branded stores andhundreds of speciality stores have been newly opened. Through a variety interactive offline events withJoyoung fans, consumer data has been turned into business value. Meanwhile, the Company’somni-channel network has also facilitated penetration into diversified customer groups.
As an important contributor of the Company’s revenue, online business has remained a robustgrowth. The Company has deployed flagship stores with different focuses on categories, through which ithas better engaged the younger generation, achieved a coverage of diversified consumer groups,strengthened consumers’ awareness of its brands and products and enhanced communication betweenbrands and consumers.
(3) Product Advantage
Thanks to people’s pursuit for a better and quality life and the promotion of consumption upgrade,consumer demands for sleek, smart and quality products continue to grow. Smart appliances make itmore convenient and comfortable to use, saving time and energy for users with improved the
user-experience, and eventually enhance the value of products and brands. The Company has launchedproducts in different brands with different market positioning to satisfy diversified demands of differentconsumer groups. By further penetration into the market and expansion of its capacity, the Company hasbeen progressively obtaining more market share.In the reporting period, based on consumer insights, the Company continues to focus on coremainstream categories and develop products that can tackle pain-point issues with the three-tier R&Dsystem within the Company. The SKY series, including the K series self-cleaning cell-wall-breakingsoymilk maker, the Y series self-cleaning cell-wall-breaking high-speed blender and the S series steamrice cooker with liner free of inner-coating, has achieved favourable feedback from the market. Byupgrading technology, the above-mentioned product series has expanded to the mass-market pricerange to satisfy diversified customer demand. Or, from another perspective, the Company has managedto penetrate its advantageous products into the mainstream segment.Shark adheres to the concept ofInnovate for User-experience. In addition to its patents in coretechnologies like MultiFLEX, Duo Clean, STEAM-BLASTER. etc., Shark has explored synergy in R&D,customized innovative products for Chinese families and actively launched multiple series of localizedand light-weighted products.
(4) Operating Advantage
In 2019, the Company continued its pursuit of value marketing. Oriented by customer demand, theCompany has been able to build an integrated business model that contributes to brand awareness,product and user-scenario, with more resources focused on main product categories. It has facilitated theCompany’s robust and quality growth within the consumer industry and elevated brand influence.In the 5G era, the importance of digitalization and big data utilization is more significant than ever. Viaplatforms like Wechat, Weibo and Tiktok, as well as channel networks including points of sales and pointsof after sales services, the Company now has over 20 million user-followers. A huge opportunity lies inmaintaining existing user-followers and attracting new ones.
To digitalize business operations, user networks and scenarios, the Company is exploring andpractising new retailing and live-streaming. The Company is dedicated to build a one-stop, visible andinteractive shopping scenario for consumers. It is also more convenient to monitor and share data,interact with fans, direct costumer traffic and dispatch products from warehouses closest to customers.The Company has also developed a new network operation and maintenance support platform usingmodern information systems such as Product Tracking System (PTS), Warehouse Management System(WMS) to achieve integration of software and hardware intelligence. It has realized equipmentmanagement, remote control, information collection, fault diagnosis, information push, etc., and providedreal-time expert interactive assistance with image function, pre-sales and after-sales services.
4. Key Accounting Data and Financial Indicators
(1) Key Accounting Data and Financial Indicators in Recent Three YearsWhether the Company performed a retroactive adjustment to or restatement of accounting data
□ Yes √ No
Unit: RMB Yuan
| 2019 | 2018 | Flux (%) | 2017 | |
| Operating revenues | 9,351,439,510.07 | 8,168,708,704.23 | 14.48% | 7,247,524,855.71 |
| Net profits attributable to shareholders of the Company | 824,105,192.42 | 754,255,160.96 | 9.26% | 688,918,657.33 |
| Net profits attributable to shareholders of the Company before non-recurring gains and losses | 754,001,863.43 | 569,149,447.51 | 32.48% | 605,300,787.82 |
| Net cash flow from operating activities | 1,253,024,651.38 | 408,700,191.24 | 206.59% | 48,903,264.69 |
| Basic earnings per share (RMB Yuan /share) | 1.07 | 0.99 | 8.08% | 0.90 |
| Diluted earnings per share (RMB Yuan /share) | 1.08 | 0.99 | 9.09% | 0.90 |
| Weighted average ROE | 21.22% | 20.70% | 0.52% | 18.40% |
| As of 31 December, 2019 | As of 31 December, 2018 | Flux (%) | As of 31 December, 2017 |
| Total assets | 7,467,802,731.42 | 6,660,086,381.54 | 12.13% | 5,350,746,142.18 |
| Net assets attributable to shareholders of the Company | 3,753,065,661.20 | 3,810,291,395.62 | -1.50% | 3,574,555,421.97 |
(2) Main Accounting Data by Quarter
Unit: RMB Yuan
| 2019 Q1 | 2019 Q2 | 2019 Q3 | 2019 Q4 | |
| Operating revenues | 1,798,604,618.75 | 2,388,365,703.12 | 2,068,019,945.39 | 3,096,449,242.81 |
| Net profits attributable to shareholders of the Company | 163,025,602.23 | 242,979,796.99 | 211,822,515.10 | 206,277,278.10 |
| Net profits attributable to shareholders of the Company before non-recurring gains and losses | 153,674,909.70 | 223,812,148.59 | 205,099,809.10 | 171,414,996.04 |
| Net cash flow from operating activities | 177,432,841.43 | -623,370.97 | 745,207,988.94 | 331,007,191.98 |
Whether there are significant differences between the above financial data or the total value previously disclosed quarterlyor interim reports.
□ Yes √ No
4. Shareholders and Shares
(1) Total number of common shareholders and shareholdings of the top ten common shareholders at theperiod-end
Unit: share
| Total number of common shareholders at the end of the Reporting Period | 26,458 | Total number of common shareholders at the end of the previous month of the disclosure date of this report | 23,438 | Total number of preferred shareholders with resumed voting rights at the end of the Reporting Period | 0 | Total number of preferred shareholders with resumed voting rights at the end of the previous month of the disclosure date of this report | 0 |
| Top 10 common shareholders | |||||||
| Name of shareholder | Nature of shareholder | Shareholding percentage | Total shares held at the period-end | Number of restricted shares held | Pledged or frozen shares | |
| Status | Number | |||||
| Shanghai Lihong Enterprise Management Limited | Domestic non-state-owned corporation | 50.11% | 384,523,746 | Pledged | 339,272,626 | |
| BILTING DEVELOPMENTS LIMITED | Foreign corporation | 16.93% | 129,924,090 | |||
| Central Huijin Investment Ltd. | State-owned corporation | 4.99% | 38,310,500 | |||
| Hong Kong Securities Clearing Co., Ltd. | Foreign corporation | 4.61% | 35,367,420 | |||
| E Fund Management Co., Ltd. - Social Insurance Fund Portfolio No. 1104 | Others | 1.11% | 8,500,000 | |||
| Agricultural Bank of China Co., Ltd. - CSI 500 Exchange Trade Fund | Others | 0.40% | 3,067,982 | |||
| National Social Security Fund Portfolio No. 418 | Others | 0.40% | 3,057,400 | |||
| Basic Pension Insurance Fund Portfolio No. 1205 | Others | 0.38% | 2,889,224 | |||
| Basic Pension Insurance Fund Portfolio No. 808 | Others | 0.36% | 2,750,098 | |||
| Bank of Communications Co., Ltd. - E Fund Kexun Mixed Securities Investment Fund | Others | 0.34% | 2,612,360 | |||
| Related or acting-in-concert parties among shareholders above | In April 2019, the shareholding structure of Builting Developments Limited changed. MR. Xuning WANG, the controlling shareholder of the Company, became the controlling shareholder of Builting Developments Limited (See Report No. 2019-027 of the Company on www.chinainfo.com.cn.). As a result, Shanghai Lihong Enterprise Management Co., Ltd. and Builting Developments Limited, both controlled by Mr. Xuning WANG, are defined as acting-in-concert parties by the Administrative Measures for the Takeover of Listed Companies. Other than the aforementioned related and acting-in-concert parties, the Company is uncertain about whether there are related or acting-in-concert parties among shareholders above. |
| Explanation on common shareholders participating in securities margin trading (if any) | N/A |
(2) Disclose the property rights and control relationship between the Company and the actual controller inblock diagram form
Section III Performance Discussion and Analysis
1. Performance Review of the Reporting Period
At present, post-95s and post-00s have gradually become the mainstream consumer group of thenew era. The younger generation is used to on-line shopping, and more open to new things, newchannels, and new lifestyles with higher standards. The Company has actively explored new categories,new channels, new media, etc., and explored the integration of on-line and offline development to thegreatest extent to meet the new demands represented by millennial consumer groups.
In the context of coexisting consumption upgrades and tiering, the Company adheres to valuemarketing. Through technological innovation and smart manufacturing to create mainstream core newproducts, the Company endeavours to meet the needs of diversified consumer groups for quality smallhousehold appliances, and strive to improve its profitability and brand influence.For the year of 2019, the Company has achieved operating revenues of 9,351.44 million Yuan, anincrease of 14.48% year on year. Categories including food processor and nutritious food cooker bothhave achieved robust growth. The western appliances category has maintained steady growth. With theongoing optimization of product mix, the Company now has a more comprehensive product portfolioinstead of heavily reliant on a single category.For the year of 2019, cost of sales were 6,310.18 million Yuan, an increase of 13.82% year on year.Gross profit margin of the Company was up by 0.39 percentage point year on year.Sales expenses were 1,476.53 million Yuan, up by 7.25% year on year, with sales expenses ratio at
15.79%, down by 1.06 percentage points. General and administrative expenses were 388.89 million Yuan,up by 25.32% year on year, with its ratio at 4.16%, up by 0.36 percentage point; research anddevelopment expenses were 330.38 million Yuan, a year-on-year increase of 10.99%.
For the year of 2019, total profits of the Company were 939.92 million Yuan, up by 7.91%year-on-year. Net profits attributable to the Company’s shareholders were 824.11 million Yuan, up by
9.26% year-on-year.
For the year of 2019, net operating cash flow was 1,253.02 million Yuan, a 206.59% year-on-yearincrease due to rapid growth of operating revenue and good cash collection.
In the Reporting Period, the company continued to focus on the small household appliance industry,actively engage in the development of 5G mobile internet, and strive to achieve a comprehensive digitaltransformation, achieving cross-border operations in different fields such as social e-commerce, on-linelive streaming, and O2O new retailing, allowing the seamless integration of brands, products, and users.
Pioneer in R&D and Smart Products, with Focus on Mainstream Categories
Since established, the Company has always attached great importance to the reserve and output oftechnology research and development. In 2019, the Company has explored the forward-lookinginnovative technologies, focused on mainstream demand categories, improved the R&D system andmechanism, and introduced senior R & D talents to effectively promote technological progress andinnovation. In the Reporting Period, the Company has obtained 1,770 new patent rights, including 256patent rights for inventions, 1,316 patent rights for utility models and 198 patent rights for industrialdesigns. By the end of the Reporting Period, the Company owned a total of 6,521 patent rights, including316 patent rights for inventions, 5,284 patent rights for utility models and 921 patent rights for industrialdesigns, which laid a solid foundation for the Company to continuously create advantageous coreproducts with competitive edges.With its three-tier R&D system, the Company can react quickly to market demand, satisfy consumer’sdemand for quality lifestyle small household appliances and keep leading the industry. The Company ishighly invested in R&D, bringing sustainable innovation momentum. It strives to provide quality productswith the spirit of craftsmanship, create value and enhance brand property. Hence, customers arewell-aware of Joyoung as an innovative, dynamic and value-added brand that facilitates healthy lifestyleand can be trusted, which will promote the steady development of the Company.In 2019, the Company intensively promoted the innovative SKY series, including the K seriesself-cleaning cell-wall-breaking soymilk maker, the Y series self-cleaning cell-wall-breaking high-speedblender and the S series steam rice cooker with liner free of inner-coating. By upgrading technology, theCompany has expanded the aforementioned product series to the mass-market price range to satisfydiversified customer demand. Meanwhile, the Company has also collaborated with trendy IPs, e.g. LINEFRIENDS, in multiple categories, attracting younger generations and stimulated purchases. Suchcollaborations with IPs have helped Joyoung, the national brand advocating healthy lifestyle, furtherpenetrate to younger generations.Brand Communication Upgrade and Cross-Channel Integration
Healthiness has always been in the DNA of the Company. In recent years, the Company's brandpositioning and communication methods have become younger. In early 2019, the Company signed anA-lister, Deng Lun as the brand ambassador, reaching the target group in a proactive and precise manner.The Company is persistent in value creating and value marketing. Upon maintaining traditional mediacommunication, it has been actively promoting new media such as outdoor media, social media andvertical media. To cater to the new development trend of 5G mobile internet, it has also been usingemerging communication channels such as short videos, on-line live streaming, content influencing, andin-depth experience to interact with fans, users, and consumers at high frequency and quality. In suchmanner, the Company has been continuously improving the brand influence as well as brand awareness,loyalty and willingness to purchase among the main consumer groups in the new era.To adapt to the development of the new economy, the Company has been actively cooperating withmajor live-streaming platforms. Having seized the opportunity in on-line live-stream marketing, theCompany was able to broaden communication channels and establish a comprehensive live-streaminghosts system consists of celebrities, KOLs (Key Opinion Leader) and KOCs (Key Opinion Customer).During the COVID-19 outbreak, the Company has started a campaign of “stay healthy, stay at homechallenge”. It took the form of live streaming by online and offline stores and shopping guides and createda huge influence.In 2019, the Company actively deployed and expanded the offline new retailing channel. It has notonly optimized traditional POS, but also promoted the development of high-end brand stores especiallythose in shopping malls, through which the Company has explored offline channel operations with highercost, more customer traffic and higher added-value. Facing the drastic changes in traditional retailchannels, the Company proactively adapted to the new trend of online and offline omni-channeldevelopment, gradually diminished the definition and division of labour of traditional channels andestablished an omni-channel development strategy. Now, it offers O2O new retailing experience includingcontent influencing, offline experience, online ordering, quick delivery, and on-site service, which has
shortened the distance with consumers, users, and fans. Meanwhile, it has also helped accumulate adatabase of tens of millions of users and fans, which has provided massive volume of big data for futurein-depth excavation of digital economy.In 2019, the on-line retail sales of physical goods were 8.5 trillion Yuan, a year-on-year increase of
19.5%, accounting for 20.7% of the total retail sales of consumer goods. In 2019, the Company's onlinebusiness maintained a relatively strong growth, and has contributed substantially to total revenues. Theproportion of online revenue in total revenues of the Company was also higher than much of the industry.
2. Whether there is significant change in the main business during the Reporting Period
□ Yes √ No
3. Products accounting for above 10% of the Company’s main revenue or profit
Unit: RMB Yuan
| Product | Operating revenues | Operating profits | Gross profit margin | Operating revenues flux (%) | Operating profits flux (%) | Gross profit margin flux (%) |
| Food processor | 4,096,943,718.53 | 1,615,877,668.15 | 39.44% | 20.20% | 21.53% | 0.43% |
| Nutritious food cooker | 3,105,020,253.15 | 777,031,079.12 | 25.02% | 13.32% | 8.86% | -1.03% |
| Western appliance | 1,153,044,666.20 | 387,180,794.82 | 33.58% | 7.23% | 11.13% | 1.18% |
4. Events Related to Financial Statements
(1) Statements of Any Changes in Accounting Policies, Accounting Estimates and Accounting Methodsas Compared to the Financial Report for the Prior Year.
① On March 31, 2017, the Ministry of Finance issued the “Accounting Standards for BusinessEnterprises No. 22 – Recognition and Measurement of Financial Instruments” (Accounting [2017] No. 7)and “Accounting Standards for Business Enterprises No. 23 – Transfer of Financial Assets” (Finance[2017] No. 8), on May 2, 2017, the “Accounting Standards for Business Enterprises No. 37 – FinancialInstruments Presentation” (Accounting [2017] No. 14) (collectively referred to as the “New Financial
Instruments Guidelines”) was issued and required The listed companies in China alone will beimplemented on January 1, 2019.
② On April 30, 2019, the Ministry of Finance issued the “Notice on Amending and Distributing theFormat of Financial Statements of General Enterprises for 2019” (Accounting [2019] No. 6), which revisedthe format of general enterprise financial statements. The Company has adopted the retrospectiveadjustment method and has adjusted the comparative data of comparable accounting periodsaccordingly.
③ On September 19, 2019, the Ministry of Finance issued the “Notice on Revision and Issuance ofthe Format of Consolidated Financial Statements (2019 Edition)” (Accounting [2019] No. 16), which isapplicable to companies that implement corporate accounting standards in preparing the 2019consolidated financial statements and that of subsequent periods. According to the relevant requirementsof the Ministry of Finance, the Company has changed the accounting policies.
(2) Statements about Retrospective Restatement of Major Accounting Errors in the Reporting Period
□ Applicable √ Not applicable
None in the Reporting Period.
(3) Statements for Changes in Scope of the Consolidated Financial Statements as Compared to theFinancial Report for the Prior Year
Hangzhou Jiuyang Company, a subsidiary of the Company, established a non-wholly-ownedsubsidiary Hengqinjiujiu Company with a capital of RMB 19,798,000 Yuan on May 24, 2019, with a shareof 98.99%.Section IV. Outlook for the Company's Future Development
1. Analysis of the External Environment Faced by the Company
In 2019, China's economy faced downward pressure, with increasing external challenges and many
other adverse factors. Under the strong leadership of the Central Committee of the CPC represented byGeneral Secretary Xi, the economy continued to achieve high-quality growth throughout the year, withpeople being better off. Earlier, the report of the Nineteenth National Congress of the CPC also pointedout that the main contradiction of Chinese society has been transformed into "the contradiction betweenthe people's growing needs for a better life and imbalanced and insufficient development". It identifies thatpeople’s main aspiration is shifting from subsistence to quality life.Referencing to the history of household appliances consumption in developed economies, it can beconcluded that, along with the improvement of income level, household appliances consumption will beshifting from large appliances with emphasis on functionality to small appliances with emphasis on qualityconsumption. It is expected that the small household appliance industry will continue to improve in thefuture, with much room to grow.In turn, it is necessary for small appliances companies to make transformation and actively satisfy thedemands of consumer groups in the new economic era in regard of technology R&D, product design,brand positioning, communication language, sales media, etc. As a leading brand in the domestic smallhousehold appliance industry, the Company has conducted in-depth research on new changes in themarket and has accumulated rich experience and prepared a systematic response strategy.
2. Future Development and Business Operation Plan of the Company
Joyoung has transformed into a younger brand with the launch of its new brand advocate,enjoyhealth. In the future, the Company will continue to focus on small household appliances and innovate inmainstream products and categories by being customer-centric and demand-oriented. Joyoung willcontinue to implement the developing strategy of “focus and upgrade kitchen”. In the meantime, Shark willroot itself in household cleaning appliances and dedicated to becoming No.1 in this segment worldwide.
Upon the its commercialization, 5G network will become "the new infrastructure" in the process ofsocial and economic development. It is particularly important to fully implement the digital transformationto adapt to mobile internet and explore new retailing model of the future. Driven by momentums in product
and channel and oriented by customer demand, the Company proposes to attract more consumers of thenew era with its innovative products that are sleek and light-weighted, smart and easy-to-use and providechoices of supplementary ingredients. Moving forward, the Company will also actively grasp businessopportunities in the new economy and live streaming, proactively cater to new customer behaviour anddemand, intensively promote digital and social network-reliant new retailing and widely develop newusers, attract new fans and establish new channels, through which it will create a new retail operationmodel customized for its development.
In the future, the Company will also continue to explore opportunities of extensive development andlook for favourable expansion opportunities to strategically acquire brands, resources, products, channels,talents, etc., to sustain longer term development.