1H21 results are in line with previous forecasts

The company announced its results for the first half of 2021:1H21 achieved revenue of 3,229 million yuan, an increase of 1.2% over the previous year; Guimu's net profit was 138 million yuan, up 43.9% year on year, in line with the previous performance forecast range; after deducting net profit of 99 million yuan, a year-on-year increase of 63.6% on a quarterly basis, Q1/Q2 revenue was +9.0% 8.2% year on year, and net profit was +80.3% 15.6% year on year

Excluding the impact of the base effect caused by the 2020 epidemic, the company's net profit of 1H21 to the mother increased by 1.3% compared to 1H19, which is basically the same, and transformation needs to be further promoted.

Development trends

1. 1H21 revenue was basically the same year over year. The company's 1H21 revenue increased slightly by 1.2% year on year, with a decrease of 8.2% in Q2 alone. We expect it to be mainly affected by increased competition and repeated epidemics. By business format: 1) The department store industry achieved revenue of 1.26 billion yuan, an increase of 27.0% over the previous year, mainly due to a decrease in passenger flow under the influence of the 1H20 epidemic, which had a lower base; 2) The supermarket industry achieved revenue of 1.75 billion yuan, a decrease of 11.3% over the previous year, mainly due to the high level of sales growth due to the undertaking of epidemic distribution tasks in closed neighborhoods designated by the government in the same period last year; 3) Agricultural products trading market: achieved revenue of 190 million yuan, an increase of 18.0% over the previous year.

2. Profitability continues to improve. 1H21's gross margin increased 2.5ppt to 32.3%, and the gross margin of all main businesses improved year-on-year; on the cost side, the sales expense ratio decreased by 0.3ppt to 7.2%, the management expense ratio increased by 1ppt to 15.9% 6, and the financial expense ratio increased 0.4ppt to 1.1%, mainly due to the increase in interest expenses confirmed under the new leasing standards. Under the overall influence, the company's net interest rate increased by 1.3ppt to 4.3%, and after deducting non-net interest rate, it increased by 1.2ppt to 3.1%. Overall cost reduction and efficiency were good, and profitability continued to recover.

3. Continue to pay attention to the results of business transformation and innovation transformation. The company is currently actively promoting the “double main business+” strategic transformation around the theme of “collaboration, new trends”: the main business innovation creates new advantages: in the department store business format, consolidates advantageous categories, introduces high-end brands and new brands, and increases the proportion of high-quality product updates and upgrades; Hejiafu continues to explore partnership mechanisms to consolidate core products and strengthen fresh products; 2) Collaborate to form synergies: strengthen business format collaboration, promote the integrated development of the “farm+supermarket” model, strengthen resource sharing; strengthen regional collaboration, the department store delivery business format Small and old, bringing new things, family food accelerates implementation of fresh food standardization, agricultural products business development week Core advantages of Guardui; 3) Deepen technological empowerment: promote informatization and digital upgrading, continuously improve infrastructure such as CRM systems, WBS systems, membership systems, etc., to help build a smart business system and a smart agricultural approval platform. In the future, we will continue to pay attention to the results of the company's business transformation and innovation transformation.

Profit forecasting and valuation

We keep the company's 2021/2022 earnings forecast of 0.26/0.28 yuan unchanged. The current stock price corresponds to the price-earnings ratio of 17/16 times 2021/2022. Maintaining an outperforming industry rating and target price of 6.0 yuan, corresponding to a price-earnings ratio of 23/22 times 2021/2022, there is room for 35% upward from the current stock price.

risks

Competition in the industry has intensified and transformation risks have been tightened, and real estate regulation has been tightened.