As much as we want it to last long and stay in good shape, due to wear and tear, our beloved microwave oven broke down and is beyond repair. Thanks to e-commerce, we don’t have to travel down to the shopping mall to purchase but can simply buy them online and get them delivered to our place. My wife straight away decided that the only brand that she considers is Tefal.
It just seems to be ingrained into her mind that she’s only ok with this brand, and is resistant to switching to other brands. Similar to her unwavering support on Apple phone that she linked up with her iPads and Apple Watch. Probably it’s due to the quality that this brand offers. She must subconsciously feel that that Tefal is superior to other brands.
Do checkout my previous article “Hunting to Invest in the Potential “Nike of China””. The article was first published on Nov 2020 where the stock was still trading at HK$2.60. If you haven’t read the article, do check it out here.
Being curious, I went to research further on Tefal and found that Tefal is one of the brands that belongs to Groupe SEB. Other brand names associated with Groupe SEB include All-Clad, IMUSA , Krups, Moulinex, Rowenta, Tefal (including OBH Nordica) and WMF Group.
If you had bought it during the Sub-prime crisis low in 2009, it will be almost a 10X bagger today!
How about China’s Tefal equivalent?
This led me to dig further on homeware / cookware products in China. My search came up with the company Zhejiang SUPOR Co Ltd (SHE: 002032) which happens to be the world’s second largest cookware manufacturer.
Globally, these product categories from SUPOR rank as one of the top in sales worldwide: Cookware, pressure cookers, steam irons, steam ironing machine, electric kettles, steam cookers, food processors, toasters, electric deep fryers, bread makers and indoor grills.
What I like about Zhejiang SUPOR?
In China, SUPOR has about 40,000 points of sales covering 100% of cities. Leveraging on e-commerce, they are strategic partners of Tmall, JD.com, yhd.com and Suning.com.
SUPOR has 5 R&D and Manufacturing Sites in Hangzhou, Wuhan, Shaoxing, Yuhuan, and Vietnam. They have secured multiple patents and have drawn up state and industry standards for cookware and SDA industries.
The Management Team
What’s interesting is that the Chairman of the board of SUPOR happens to be Mr Thierry de La Tourd’Artaise who’s also the Chairman and CEO of Group SEB. Globally, SUPOR products are being sold through Groupe SEB’s network to more than 50 countries and regions, including Japan, Europe and South East Asia.
Next, I took a look at some of SUPOR’s largest shareholders. It’s none other than SEB Internationale SAS (Groupe SEB). Other notable shareholders include Fidelity International, JPMorgan Asset Management, Blackrock, and Ping An Fund Management.
Groupe SEB, SUPOR’s strategic shareholder, founded in 1857, has more than 150 years of history. 200 million products are sold every year in more than 150 countries.
A quick look at SUPOR’s financials
Increasing Revenues and Profits since year 2017
With the exception of 2020 where revenues / profits were probably affected by COVID-19. Apart from revenues / profits:
- Current Ratio of 2.01,
- Total Debt to Equity of 0%.
- Gross Margin is at 25.8% while
- Net Profit Margin is 9.9%,
- and its Return on Equity (ROE) stands at 26.3%.
How does SUPOR fare against competitors?
If we compare this to SUPOR’s competitor Joyoung Co Ltd (SZSE:002242), Joyoung’s numbers seemed to fare better with revenue and profit growth even during the pandemic year 2020.
I did not compare with Midea Group and Haier as they have a wider range home appliances product line. Hence, a better comparison will be with Joyoung Co Ltd as both companies’ product lines focus on cookware / kitchenware.
SUPOR is currently selling at 32.87 Price Earnings and 8.42 Price to Book whereas Joyoung is trading at 27.26 Price Earnings, 5.98 Price to Book (at the point of writing).
How is SUPOR’s Dividend Yield?
Though not fantastic, SUPOR has been giving out dividends for the past decade.
How is SUPOR’s Market Share?
A search sorted by bestsellers under cookware category yields result where SUPOR is one of the top few brands under JD in China.
Market Size of the kitchenware industry will likely hit US$77.4 Billion by the year 2025 with a CAGR of 4.5%.
Though not as fantastic as “tech”, I’m betting on the idea that kitchenware and similar household products serve a need instead of a want. These are essential lifestyle products that have been always needed in the past and present, and will likely continue to be needed in the future.
As China become more urbanise, there’s a good chance where more will adopt the use of modernized electrical kitchen wares as compared to traditional cooking methods.
The below chart shows the percentage of rural population dropping to below 40% in China.
There are many brands available with regards to home electrical appliances and pricing might be competitive.
However, high-end brand business is expected to become an important growth engine. In China’s cookware market, 75% are low to mid end products, and high-end products of only 8%, with much room for growth.
WMF (an “atas” brand under Groupe SEB) has captured the number 1 market share in Germany in terms of high-end brand cookware products. With Groupe SEB management being the concurrent management of SUPOR, they are able to bring forth expertise (having the experience to grow WMF market share) and the probability of SUPOR succeeding under the high-end market is higher than that of their competitors.
Possible Risks of investing in SUPOR
Nevertheless, it does not come without risks. There are a few factors, including rising inflation, rising commodity prices, rising raw material costs, and the continual intensified competition amongst kitchenware producers which will eat into its bottom line.
Another area of concern is the global shortage in semiconductors that had disrupted carmakers, gaming console and have now spread to home appliances industry. China produces about two-thirds of some of the world’s electrical home appliance such as air conditioners, televisions and microwave. The shortage might drive up cost for home appliance producers.
SUPOR is currently selling at 32.87 Price Earnings, 8.42 Price to Book (at the point of writing). Being a “non-tech” stock and base on historical PB & PE and industry average, valuation seemed to be slightly on the high side.
As compared to its competitor Joyoung, no doubt Joyoung numbers look better, but there are qualitative aspects that I preferred on SUPOR over Joyoung. However, that being said, I might still consider to place a position in Joyoung as well.
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Disclosure: At the point of writing, the author owns shares of SUPOR Co Ltd (SHE: 002032). Investors should conduct their own due diligence before engaging in any buying / selling of any of the shares mentioned.
Disclaimer: The article is subject to errors and omissions. Just sharing from my own experience as I have put my own money into the stock market over a period of 17 years. I am not a Chartered Financial Analyst (CFA) Charterholder and I do not have any finance-related qualifications.
