Bubugao released its three-quarter 2021 report that the company's revenue in the first three quarters was 10.47 billion yuan, down 13.87% from the same period last year, and its net profit was 172 million yuan, an increase of 1.77% over the same period last year, deducting the non-return net profit of-166 million yuan, down 221.56% from the same period last year. Q3 achieved revenue of 3.162 billion yuan in a single quarter, down 13.23% from the same period last year. The net profit returned to the mother was-36 million yuan, down 1262.80% from the same period last year, deducting the non-return net profit of-35 million yuan, down 3104.55% from the same period last year. The epidemic situation + the decline of consumption tendency + the impact of community group purchase, the company's short-term income and profits are under pressure, and the company's online transformation is in the long run.

The structural adjustment superimposed the epidemic situation, and the income and profits were under pressure. The company's revenue in the first three quarters was 10.47 billion yuan, down 13.87% from the same period last year, while its net profit was 172 million yuan, up 1.77% from the same period last year. Q3 achieved revenue of 3.162 billion yuan in a single quarter, down 13.23% from the same period last year, and its net profit was-36 million yuan, down 1,262.80% from the same period last year.

Since 2021, the company has implemented the new lease standard to confirm the cost, and the new store has affected the current profit and loss due to the increased investment in promotion and other expenses and the start-up cost during the preparation period. At the same time, the impact of community group purchase superimposed the epidemic situation + the decline of consumption tendency + the impact of community group purchase, the rigid cost of the same store has increased, and the company's short-term income and profits are under pressure.

The impact of offline competition will be intensified, and the impact of the new leasing criteria will be magnified. The company's gross profit margin in the first three quarters was 31.55%, up 2.63pct from the same period last year, sales / management / financial expense rates were 26.51%, 2.55%, 3.74%, respectively, year-on-year change + 3.76/+0.32/+1.48pct, net profit 1.65%, up 0.26pct from the same period last year. Q3 single-quarter gross profit margin 35.17%, year-on-year increase in 3.33pct, sales / management / financial expense rates of 29.11%, 2.71%, 4.09%, respectively, + 2.63/+0.29/+1.29pct, net profit-1.13%, down 1.21pct from the same period last year. Since the beginning of the year, the company has recorded a non-recurrent income of 338 million yuan, mainly due to the investment income from the completion of the issuance of the company's asset securitization project in June 2021.

Short-term affected by many factors, look forward to deepening online transformation and store adjustment. During the reporting period, the company's performance fluctuated greatly under the multiple influence of the downward macro consumption level, the normalization of epidemic situation, new standards and community group buying, but the net profit level of the company improved after the implementation of digital transformation and supply chain reform in 2020. At the same time, the decline in the proportion of proprietary business also has an impact on profit margins, and the company is still actively adjusting its store structure.

Investment suggestion: the company is expected to achieve a net profit of 1.86 million yuan in 2021 and 2.17 billion yuan in 2023, and the current stock price corresponds to a 22-year PE of 27X. The company is affected by many factors in the short term, but the online transformation and supply chain reform have achieved results, the company is also actively carrying out store adjustment, optimistic about the company's long-term development, and maintain the "highly recommended-A" rating.

Risk hint: the competition in the industry is becoming increasingly fierce, and the digital transformation is not up to expectations.