2014 First Half Results Review: Business Optimization Brings Performance Growth
Guangbai Co., Ltd. achieved revenue of 3,937 million yuan in 2014H1, a year-on-year decrease of 3.01%. Under unfavorable conditions such as weak consumption, store closures, store adjustments and renovations during the same period, the company's revenue fell only slightly, and the performance was clearly superior to its peers; net profit attributable to shareholders of listed companies was 119 million, up 7.48% year on year; 1) The gross margin of 2014H1 fell 0.94 pp to 18.44% year on year, mainly reflecting increased competition and an increase in the share of low gross margin gold and silver jewelry sales; 2) 14H1 sales and management expenses fell 0.84pp to 13.34% year on year. Apart from the rigid increase in employee remuneration of 5.99%, rent, depreciation, and operating expenses They are all due to store closures and Active adjustments fell 5.00%, 25.73%, and 18.69% respectively, showing good cost control capabilities; 3) 14H1 added wealth management products and microloans totaling 10 million revenue, effectively boosting net interest rates by 0.41 pp to 2.96% year-on-year; 4) 14H1 adjusted 10 stores inside and outside Guangzhou to optimize operations; transformed Liwan stores into community lifestyle stores, and actively explored projects suitable for community management while accelerating the online and offline integration of various departments.
Business outlook for the second half of the year: structural optimization+state-owned enterprise reform boosts a new round of development
As the terminal retail industry stabilizes in the second half of the year, the company's stores are expected to pick up relatively quickly as they actively adjust and transform into shopping centers and community retail formats. In the second half of the year, the company's earnings from maturing wealth management products were close to 10 million, and it is expected that there is still room for growth in microfinance companies' earnings. As the vanguard of Guangdong's state-owned enterprises in reforming trade and retail, Guangbai Group, the majority shareholder of Guangbai Co., Ltd., has more than 10 billion property resources and an operating team with corresponding advantages in commerce, exhibitions, and logistics. Judging from Guangdong Province's idea of securitizing state-owned assets, asset restructuring, and expanding and strengthening local state-owned enterprises, it is likely that high-quality assets from unlisted companies under the Guangbai Group will continue to be injected into Guangbai shares to enrich the main business of Guangbai Co., Ltd. and optimize resource allocation, which will greatly enhance the competitiveness and profitability of Guangbai Shares. State-owned enterprise reform will be an additional impetus for promoting the development of 100 shares for some time to come.
Profit forecasting and investment advice
As a retail leader in Guangdong Province, in the face of an increasingly severe competitive environment in recent years, the company has actively adjusted its store opening strategy, refocused on the advantageous market in Guangdong Province, and at the same time actively expanded microfinance and transitioned to mobile internet. Profitability has improved in 2013. However, since the company will mainly explore potential within stores in the next two years, the growth in the company's revenue and net profit is expected to be stable. The company is our first target for state-owned enterprise reform in Guangdong. Taking advantage of Guangdong's state-owned enterprise reform style, the company is expected to receive high-quality asset injections from the parent company, and its competitiveness and profitability will improve. Maintain the company's 14-16 EPS of 0.70, 0.76, and 0.82 yuan, give it 15 XPE in 14, a reasonable value of 11 yuan, and maintain the “prudent increase in holdings” rating.
Risk warning: Terminal retail sales have weakened sharply, and the progress of state-owned enterprise reform has fallen short of expectations.