Offline demand in fiscal year 23 has not yet recovered, and there are still losses under the influence of impairment. During the first half of fiscal year 2023 on September 30, 2022, the company achieved operating income of 40.61 billion yuan,-2.23% compared with the same period last year, of which commodity sales income was 39.08 billion yuan, year-on-year-1.7%, rental income 1.53 billion yuan, year-on-year-18.6% The net profit of returning to the mother was-67 million yuan, compared with the same period last year (mainly due to weak offline consumption, impact calculation of store buildings and rental decoration, equipment and right to use impairment of 142 million yuan). Excluding the effect of impairment loss, the net profit is about 20 million yuan. Offline consumption has not yet recovered in fiscal year 23. We adjusted our forecast for fiscal year 2023-25 to forecast that the EPS will be 0.002max 0.10max 0.16 yuan (prior to 23-25 FY23-25 0.03 pm 0.09max 0.11 yuan). As of 2022-11-16, according to Wind's unanimous expectation, the average PE of comparable companies in the 2023 natural year will be 25x, taking into account the fact that the company continues to restructure its offline business format, and the optimization of epidemic control measures may lead to the recovery of passenger flow, but there is still an impairment impact, giving the company 25x PE in fiscal year 2024, corresponding to the target price of HK $2.82 (the previous value is HK $2.95), maintaining the "overweight" rating.
The decline in same-store sales narrowed significantly, and the number of employees continued to shrink.
The company's same-store sales in the first half of fiscal year 23 were-0.2% compared with the same period last year (1H/2HFY22-7.1% Universe 6.1%, respectively), and the decline in offline passenger flow remained the main negative factor. During the reporting period, the company closed 2 large stores and 4 small Runfa, but net opened 1 Runfa. As of September 30, 2022, the company has 488 large stores, 10 Zhongrun Fat and 99 small Runfa. The number of employees continued to shrink to 114500 (down 7520), but per capita pay rose 7.3 per cent from a year earlier.
Profit margin continues to be under pressure, and operating profit margin is still low after excluding impairment.
The company's gross profit margin, sales and marketing expense rate and administrative expense rate in the first half of fiscal year 23 were year-on-year-1.4pct,-0.7pct and-0.3pct, respectively. The company's overall revenue performance is weak, and the proportion of online business is increasing, and its gross profit margin is relatively low. The impairment loss of stores decreased by 215 million yuan compared with the same period, resulting in a year-on-year decline in the rate of sales and marketing expenses. If the impact of 142 million yuan is not taken into account, the company's operating profit is 642 million yuan and the operating profit margin is 1.6%. (excluding impairment and other effects in fiscal year 22, the operating profit margin is 2.1%.)
Offline business format continues to be reconstructed, and online business performance is positive
Offline retail business has not yet fully recovered, the company actively promotes the reconstruction of hypermarkets to enhance the attractiveness of offline consumption, and the transformation of stores in East China has yielded preliminary results (double-digit growth in store receivables after the transformation). On the other hand, the online sales mix continues to be optimized, the customer unit price continues to rise, and double-digit income growth is achieved. Considering that the profit model is still being reconstructed offline, the exhibition store plan is still more cautious.
Risk hint: retail demand remains sluggish. Business expansion fell short of expectations.