The 1-3Q performance is lower than we expected.
The company announced 1-3Q22 results: operating income reached 9.211 billion yuan, down 1.4% from the same period last year; the net loss was 116 million yuan, compared with 24.72 million yuan in the same period last year, which was lower than we expected, mainly due to repeated superimposed competition and reduced government subsidies; deducting a non-net loss of 130 million yuan, compared with a net loss of 76.61 million yuan in the same period last year.
From a quarterly point of view, Q1/Q2/Q3 revenue fell 1.2%, 1.8%, 1.1%, net profit of 2.2 million yuan /-4186 yuan /-76.44 million yuan, and non-net loss of 6.33 million yuan / 47.68 million yuan / 75.65 million yuan, respectively.
Trend of development
1. Revenue in the first three quarters fell 1.4% compared with the same period last year. Affected by increased competition in the industry and repeated epidemics and other factors, 1-3Q22 revenue fell 1.4% year-on-year, of which single Q3 revenue fell 1.1% year-on-year. From a sub-format point of view, 1) supermarkets: we expect that the format of supermarkets will continue to be under pressure due to increased competition, and the company is currently trying to improve its operation by opening new model stores such as medium-sized kitchen stores and neighborhood fresh convenience stores; 2) Department stores: we expect to be repeatedly affected by the epidemic, and the customer flow and efficiency of individual stores will still decline compared with the same period last year.
2. Profitability continues to suffer. 1-3Q22's gross profit margin slightly decreased to 24.7% compared with the same period last year. From the expense point of view, the sales expense rate reached 19.9%, unchanged from the same period last year; the management + R & D expense rate increased to 4.3% year-on-year, mainly because the company promoted the construction of data centers and strengthened the research and development of intelligent supply chain projects; the financial expense rate increased by 0.1ppt to 1.1% compared with the same period last year. Under the combined influence, the company's net interest rate fell by 1.0ppt to-1.3% compared with the same period last year, and the non-net interest rate decreased by 0.6ppt to-1.4% compared with the same period last year. The profitability continued to suffer, and the loss increased quarter by quarter.
3. Pay attention to the operation improvement after the arrival of the equity incentive plan. On October 15th, the company launched the 2022 restricted Stock incentive Plan (draft), which intends to grant 24.99 million restricted shares at a price of 3.00 yuan per share to the incentive target (a total of 372 senior executives, middle managers, etc.). The performance evaluation objectives of the incentive plan are as follows: 1) the average rate of return on net assets (EOE) in 2023, 2024, 2025 is not less than 31.0%, 31.5%, 31.7%, 2) at the same time, based on the total profits in 2021, it is required that the growth rate of total profits in 2023, 2024, 2025 is not less than 300%, 500%, 600%, and the proportion of main business income to operating income in each year is not less than 90%. We believe that the incentive plan covers a wide range of areas and is expected to fully mobilize the enthusiasm of the management team, and it is suggested that we should pay attention to the follow-up business improvement.
Profit forecast and valuation
Based on the repeated epidemic and intensified competition, we reduce the company's 2022 pedigree net profit forecast for 2023 from-0.40 million yuan to-1.19 billion yuan, and the current share price corresponds to 0.26 times Plap S for 2022max 2023. Maintain the neutral rating and the target price of 4.4 yuan, corresponding to 0.25GBP S in 2023, which is 6% lower than the current share price.
Risk
Competition in the industry intensifies, the epidemic situation is repeated, and consumption remains depressed.