The company is the leader of Hunan Shang Chao and has a leading market share in the region.
As a leading trading enterprise in Hunan, the company has a total of 417 stores as of 21H1. In recent years, the company continues to increase its digital input, leading the industry in O2O level, with more than 20 million digital members.
Q3 performance is under pressure, mainly affected by industry factors and new leasing standards. In terms of revenue, 2021Q1-3's revenue dropped 13.87% compared with the same period last year, mainly affected by the transformation of home appliance business from self-management to five-star joint venture, joint venture and leasing from July 2020, as well as the normalization of epidemic prevention and control and the impact of community group buying.
In terms of profit, the net profit of 2021Q1-3 was 172 million yuan, which was basically the same as the same period last year, while the net profit of deducting non-parent decreased by 222% to-166 million yuan. The decline of non-return net profit is mainly affected by the decline of residents' propensity to consume under the influence of the epidemic, the impact of community group purchase on physical retail and the new standards of leasing. In addition, in June, the company's Jinxing Road Bubugao Plaza real estate asset securitization project completed the issuance of 400 million yuan + asset disposal income.
The prosperity of the industry is at a low ebb, and the company's expense rate has increased.
In terms of gross profit margin, the company's gross profit margin rose by about 2.6pct to 31.55% in the first three quarters compared with the same period last year. In terms of expense rate, the expense rate of 2021Q1-3 during the period was 33.01%, an increase of about 5.6pct over the same period last year, mainly due to the decline in revenue scale, new store opening and promotion fees, and new lease guidelines.
It is proposed to invigorate assets through trust to further enhance the operational capacity of commercial real estate. The company plans to set up a trust in Singapore and list on the main board of the Singapore Stock Exchange with two commercial complexes located in Hunan Province as the underlying property assets. this will optimize the company's asset-liability structure, improve the company's commercial real estate operation capacity, and further expand the company's operating scale and efficiency.
Investment advice: since 2021, the prosperity of the super industry has declined, and residents' propensity to consume has been reduced by the epidemic. At the same time, new business type, such as community group buying, has a continuous impact on physical retail, and superimposed the impact of new leasing standards. The company's performance fluctuated to a certain extent.
During the low period of the industry, the company continues to increase the construction of information technology, improve the digital level, integrate the supply chain capacity and adjust the store structure. It is estimated that the company's net profit from 2021 to 2023 is 1.4,1.6 and 190 million yuan, corresponding to 42, 37 and 31 times of PE respectively, maintaining the "overweight" rating.
Risk factors: industry competition intensifies; store expansion falls short of expectations; residents' propensity to consume decreases
