In 2014, the company achieved operating income of 7.795 billion yuan, an increase of 8.59% over the same period last year; the net profit attributed to the parent company was 444 million yuan, equivalent to 0.60 yuan per share, an increase of 15.4% over the same period last year. Excluding real estate business income, earnings per share is about 0.5 yuan, which is basically in line with our profit forecast of 0.505 yuan. The company's net profit after deducting non-profit was 369 million yuan, equivalent to 0.5 yuan per share, an increase of 1.38% over the same period last year. Based on the total share capital at the end of 2014, the company plans to implement a capital accumulation fund for all shareholders to increase 15 shares for every 10 shares, with a cash dividend of 3.60 yuan (including tax) for every 10 shares. Calculated on the basis of 15 shares per 10 shares, we expect fully diluted earnings per share for 2015-17 to be $0.249, $0.262 and $0.271 per share ($0.623, $0.653 and $0.680 before entitlement), with a target price of $6.64 (pre-entitlement price $16.55), corresponding to 27 times 2015 P / E, maintaining the holding rating.

Support the main points of rating

During the reporting period, the company achieved revenue of 7.795 billion yuan, an increase of 8.59% over the same period last year: the revenue growth during the reporting period was mainly due to an increase of 380 million yuan in sales of new stores and an increase of 446 million yuan in real estate sales. In terms of business format, the revenue of the department store business during the reporting period reached 4.693 billion yuan, an increase of 6.57% over the same period last year. Wenfeng City Square opened on June 20 during the reporting period. The revenue of the supermarket business reached 799 million yuan, down 4.34% from the same period last year. Two new stores have been added, and the Baipu shop in Rugao opened in early 2015, with a total of 12 stores at present. Sales of the electrical appliance business reached 1.523 billion yuan, down 6.75% from the same period last year. Two new stores were added and six stores were closed. At the same time, it opened Wenfeng Electrical and Electronic Mall on Tmall's website. In terms of real estate, Wenjing Real Estate and Rugao Yangtze River confirmed income of 446 million yuan in 2014.

Revenue in the fourth quarter increased by 7.27% compared with the same period last year, and net profit decreased slightly by 0.95%. In the fourth quarter, the company realized revenue of 2 billion yuan and net profit of 119 million yuan.

During the reporting period, the gross profit margin increased by 2.11 percentage points compared with the same period last year, and the expense rate increased by 1.17 percentage points over the same period last year. In terms of gross profit margin, the company's comprehensive gross profit margin in 2014 was 19.69%, an increase of 2.11 percentage points over the same period last year, of which the gross profit margin of department stores was 17.55%, an increase of 0.12% over the same period last year, and that of supermarket business was 10.62%, an increase of 0.06% over the same period last year. The gross profit margin of the electrical appliance industry was 11.73%, an increase of 2.3 percentage points over the same period last year. In terms of the rate of period expenses, the rate of sales expenses increased by 0.63% compared with the same period last year; the rate of management expenses increased by 0.35% compared with the same period last year; and the financial expenses increased by 149.58% over the same period last year, mainly due to a corresponding increase of 8.72 million yuan in interest payments. because last year, the Qidong Urban Construction headquarters and the Qidong Financial Bureau did not deliver the land in accordance with the contract to pay 8.1823 million yuan of interest, so that the interest income in the reporting period decreased by 7.9355 million yuan. As well as handling fees, etc., reduced by 747500 yuan compared with the same period last year.

During the reporting period, the company transferred 220 million shares to Zheng Suzhen and Ms. Lu Yongmin, and the two women became the second largest shareholder after the transfer, with a shareholding ratio of 14.88%. Wenfeng Group plans to invest some of the funds raised in emerging industries and promises that once the development project is profitable, priority will be given to the company to support the company's growth and development. The transformation or diversified development of the traditional retail industry is the trend of the industry development. Major shareholders invest part of the collected funds into new industries and promise to give priority to injection into listed companies after the project is profitable, which will be conducive to the future development of listed companies. Higher company valuation is in line with the trend of industry development.

Main risks faced by rating

The training period of the new store is longer than expected, and the regional distribution of the store is concentrated.

Valuation

Calculated on the basis of 15 shares for every 10 shares, fully diluted earnings per share for 2015-17 are forecast to be $0.250, $0.262 and $0.271 ($0.623, $0.653 and $0.680), with a target price of $6.64 ($16.55 before rights) and a holding rating corresponding to 27 times 15-year p / e. In the future, with new projects in place and enterprise transformation, the possibility of upgrading the rating cannot be ruled out.