The non-net profit deducted by 1H21 is lower than we expected.
Haining Picheng announced 1H21 results: income 661 million yuan, down 15.0%; return net profit 211 million yuan, up 33.3%; deducting non-return net profit 120 million yuan, down 15.7%, lower than we expected, non-recurrent profit and loss mainly from non-current assets disposal profit and loss, fair value change profit and loss and investment income. Excluding the base effect caused by the 2020 epidemic, 1H21 deducted non-net profit fell by 37.0% compared with 1H19. From a quarterly point of view, Q1Q2 revenue is + 12.3% and non-net profit is + 16.6% and 39.5%, respectively, year-on-year and non-net profit is + 16.6% and 39.5%, respectively. The results in the second quarter are under pressure, and the transformation needs to be further promoted.
Development trend
1. The business of commercial property leasing is the same as that of the same period last year, and the income of property sales has declined: 1) property leasing: the income is 446 million yuan, which is basically the same as the same period last year; property rental remains stable; 2) sales of shops and supporting properties: the income of the project is 168 million yuan, down 43.5%, mainly due to the higher property sales income brought by the completion of the fashion town project in the same period last year. 3) Hotel service: realized income of 6.66 million yuan, with an increase of 50.6%, and achieved restorative growth after the epidemic gradually subsided; 4) Health industry: realized income of 10.06 million yuan, an increase of 15.7%, and the development of the second main industry continued to advance.
2. The expense side and deduction of non-net interest rate remain stable. 1H21 also reduced its gross profit margin by 1.2ppt to 42.2%. We expect Q2 gross profit margin to increase by 3.2ppt to 42.6% mainly due to the carry-over of Q1 property sales costs and the increase in depreciation of new items. From the expense point of view, the sales expense rate was reduced to 4.29%, and the management expense rate was increased by 2.0ppt to 7.1%, mainly due to the expiration of tax deductions and labor costs during the epidemic; and the financial expense rate was also reduced by 1.9ppt to-1.8%. Due to the substantial increase in non-recurrent profit and loss, the net interest rate also increased by 11.6ppt to 31.9%; the non-net interest rate was deducted by 18.1%, which was basically the same as the same period last year.
3. Follow up to pay attention to the transformation of the company's main business and the progress of the layout of the big health business. 1) Transformation and upgrading of main business: steadily upgrade the main leather industry, promote the reduction of leisure and efficiency in various markets, superimpose the development of fashion industry, and undertake Haining fashion enterprises in Hangzhou and Shanghai. 2) the second main business, the major health industry, has made steady progress: the rehabilitation hospital has comprehensively adjusted the core management team and business framework, the operation has been continuously improved, Yihe Home docked with high-quality resources of the rehabilitation hospital, and began to accept inpatients in May. Yihe Nursing Home has completed the transformation and successfully opened, and has passed the examination and approval of the designated medical insurance institutions. 3) online and offline integration development: accelerate the online integration process, more than 100 merchants have settled in the "Cloud Market" project built in cooperation with Alibaba Group Holding Ltd strategy, and Aliyun technology has been introduced offline to promote the transformation of digital intelligence. In the follow-up, we need to continuously track the effectiveness of the company's main business recovery and transformation.
Profit forecast and valuation
Taking into account the impact of non-recurrent factors, the forecast of earnings per share in 2021 will be raised by 6% to 0.18 yuan, and the forecast of earnings per share in 2022 will be maintained at 0.18 yuan. The current share price maintains a neutral rating and target price of 4.33 yuan for 22x 2021 / 2022 and 2425x for 2021 / 2022, which is 11% higher than the current stock price.
Risk
The competition in the industry continues to intensify, the repeated impact of the epidemic exceeds expectations, and the progress of the big health business falls short of expectations.