The growth rate of Shell has remained above 57% in the past four quarters.

This article was published in the Tiger Securities Community.

The steady first quarter earnings report of Shell brought a slight increase of 1%. Subsequently, Shell Search issued an obituary, saying that the founder and chairman of Shell Zuo Hui passed away due to illness, and the stock price fell 10% before the market. From the founding of Lianjia in 2001, to the founding of Shell He Ziru, and now that Shell is on the market, Zuo Hui used “real listings” to change the housing rental and second-hand housing trading market that used to be uneven and opaque in the past. Zuo Hui once said that we must persist in doing the hard and right things. Under the guidance of the founder’s spirit, how will the shell of the future transform the trillion-dollar real estate market?

This morning after the US stock market, Shell released its first quarter earnings report for 21 years, and its stock price rose slightly by 1%.

Before the US stock market at 3 pm, the company announced that the founder Zuo Hui had passed away due to an unexpected illness, and the pre-market plunged 10%. In addition to expressing condolences to the founder of Shell, Mr. Zuo Hui, we still have to discuss the capital market’s reaction to Shell’s financial report and the company.

Aside from the impact of the epidemic, the growth rate of more than 57% for the fourth consecutive quarter is still brave

Shell revenue in the first quarter was 20.7 billion yuan, a year-on-year increase of 190.7%; adjusted net profit was 1.502 billion yuan, compared with a loss of 1.478 billion yuan in the same period last year. This achievement steadily exceeded expectations.

Pure financial analysis, judging the performance of Shell’s financial report, grasping the three indicators of growth, gross profit margin, and operating profit margin, you can take a look. In terms of performance in the current quarter, revenue increased by 190.7% year-on-year. At first glance, it seems fierce, just as the company said, due to the low overall revenue base of the new epidemic in the first quarter of 20 years. When the year-on-year figures are inaccurate, the month-on-month figure is negative 8.7%, which can assist judgment. However, it cannot be ignored that the growth rate has remained above 57% in the past four quarters.

In addition, we see a gross profit of 4.82 billion yuan for the quarter and a gross profit margin of 23.3%. Compared to earlier 20Q4 and 20Q3, they were 5.42 billion yuan and 4.38 billion yuan, respectively, with gross profit margins of 23.9% and 21.3%. .

And operating profit in 20Q4 and 20Q3 were 1.5 billion yuan and 70 million yuan respectively, and operating profit margins were 6.6% and 0.3% respectively.

There is no obvious jump in profits and profit margins, which is not an explosion. The overall financial perception is a piece of data that is moving steadily along the established growth path.

The stock price has quadrupled in four months, and the brokers are optimistic about Shell

Shell went public in August last year, and the stock price went out of the big bull market. Since the issuance price of US$20, it has risen all the way to a maximum of US$79.4. In just 4 months, the stock price has risen to four times the issue price. As an investor, I actually want to ask why.

(Picture source comes from Tiger Securities)

Including now, when talking about shells, I will also ask a company that makes 3 billion a year (now 5 billion), why can it be valued at 400 billion (it used to be 500 billion), and why the price-earnings ratio is so high.

The answer lies in growth expectations and industry status. Perhaps the latter is more important. When a company becomes a well-deserved leader in a trillion-level market like real estate, and its market share is still visible to the naked eye, it will continue to increase: Shell’s new 2020Housing GTV (total platform transactions) is 1.38 trillion, accounting for 8% of the national new housing transaction volume; second-hand housing GTV is 1.94 trillion, accounting for about a quarter of the national second-hand housing market.

If you put aside the narrow indicator of price-earnings ratio, it feels much better to look at the price-to-sales ratio. Shell’s total revenue in the past four quarters was 84.06 billion, corresponding to a market-sales ratio of around 5. If you use the P/GMV of the e-commerce industry, the effect will be more obvious. Shell’s overall GTV in the past four quarters has reached 4.24 trillion yuan.

However, even with the most “strict” price-earnings ratio, in the broker’s forecast of Shell, “FY21E-FY23E will respectively achieve an adjusted net profit of 73.8/100.8/138.0 billion yuan attributable to the parent”, which will support the current Shell Share price performance.

The death of the founder, Shell’s stock price may be subject to higher volatility

The news of the death of Mr. Zuo Hui, the founder and chairman of Shell, must have been seen by investors. A tiger friend in the tiger community said that Shell’s stock price was grey yesterday (closed flat), and he has already expressed his condolences in advance. With such kind words, the founder died unexpectedly, but he was a black swan that investors could not foresee.

After the news was released, various groups began to reprint Mr. Zuo Hui’s interviews during his lifetime, “Interview with Zuo Hui: The Bottom Logic of a Perpetrator”, and “Zuo Hui: Doing Hard and Right Things.” Investors can read to understand what kind of thinking the shell company has been carrying for a long time.

Zuo Hui holds 38.8% of Shell’s shares. In the short term, it is common sense to invest in stock prices that will suffer higher volatility. In the long run, Shell’s industry has not reached the end of the industry, and there is still a lot to do. Losing a spiritual leader-like founder is a major loss for the company. How big the loss is, time may be answered.

Summary:

The last time shells made headlines, it was probably a “choice of two” controversy. The black swan of investors, shell investors should be reminded.

Back again to the topic of why such an expensive shell price-earnings ratio depends on how you look at a company. Is it just a “relentless” money-making machine, or a changer that reshapes the industry, an ordinary company, or an industry standard setter. If the answer is different, the valuation multiple you give it is also different.

This article was published in the Tiger Securities Community, which is a community section of Tiger Trade’s stock trading software Tiger Trade, dedicated to creating a “community for US stocks, Hong Kong stocks and British stocks closer to trading”, a warm stock exchange community.

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