In fiscal year 22, the company made a loss under the influence of repeated epidemic situation, impairment and provision. during the fiscal year to March 31, 2022, the company achieved operating income of 88.134 billion yuan,-29.3% year-on-year, of which commodity sales income was 84.595 billion yuan,-29.6% year-on-year, rental income was 3.539 billion yuan, year-on-year-21.3% The net profit of returning to the mother was-739 million yuan, compared with the same period last year (significantly lower than our expectation of 1.242 billion yuan, mainly affected by the impairment of 1.096 billion yuan in stores under the impact of the epidemic, 126 million yuan in provisions for litigation and 233 million yuan in provisions for receivables). The impact of the epidemic still exists in fiscal year 23. We adjust the forecast for fiscal year 2023-24 and introduce the forecast for fiscal year 25. The predicted EPS is 0.03 pm 0.09pm 0.11 yuan respectively (before 23-24 FY23 is 0.19pm 0.32 yuan). Taking into account the recovery of passenger flow after the epidemic, the weakening of the impairment impact, and the company's continued expansion of the small store format, we adopt a forward valuation. As of 2022-6-28, according to Wind's unanimous expectation, the average PE of the comparable company in the natural year 2023 will be 28x, giving the company 28x PE in fiscal year 24, with a target price of HK $2.95 (the previous value is HK $5.06) and maintaining the "overweight" rating.
Same-store sales continue to be weak and there are still plans to open small-scale stores.
The company's same-store sales fell 6.7 per cent year-on-year in fiscal 22 (1H/2HFY22-7.1 per cent compared with the same period last year), while the epidemic remained a major negative factor, while falling pork prices also affected same-store sales. During the reporting period, the company did not open large-scale stores, but net opened 33 Runfa and 73 small Runfa supermarkets. As of March 31, 2022, the company has 490 large stores, 9 Zhong run Fat and 103 small run Fat. Throughout the year, the company is expected to continue to expand its offline sales network, focusing on small and medium-sized supermarkets, and is expected to open 3-4 big Runfa, 15 Runfa and 100 small Runfa, and continue to implement store transformation, the first to restructure 2.0 stores to achieve double-digit growth in the same store in 2HFY22, and plans to transform more than 50 stores by FY23 to reduce operating costs and get close to consumers.
Profit margin continues to be under pressure, impairment and provision under the influence of expense rate increases the company's gross profit margin, sales and marketing expense rate, administrative expense rate in fiscal 22 year-on-year-0.8pct, + 1.9pct, + 0.02pct. Under the impact of the epidemic in fiscal year 22, revenue performance was weak, while the proportion of online business increased, resulting in lower gross profit margin and higher increase in marketing expenses, while store impairment loss of 1.094 billion yuan was included in sales and marketing expenses. as a result, the rate of sales and marketing expenses increased significantly compared with the same period last year. Without considering the impact of impairment and provision of 1.875 billion yuan, the company's operating profit is 1.893 billion yuan and operating profit margin is 2.1%.
Positive performance of online business, integration of ecology to create long-term competitiveness
As the offline retail business has not yet recovered, the company has vigorously promoted the online business, turning offline stores into online compliance centers, and online B2B\ B2C\ community group buying accounts for about 29% of the revenue. During the reporting period, the average daily order of B2C business was about 1250 (double-digit growth), and the unit price of 2HFY22 customers exceeded 70 yuan (up 6.5% from the same period last year).
Risk hint: retail demand remains sluggish. Business expansion fell short of expectations.