14Q1 profitability is improving but still low
Renle 14Q1 achieved revenue of 3.419 billion, down 3.64% from the same period last year, reflecting the weak overall growth of supermarkets; net profit belonging to listed companies was 24 million, up 3.07% from the same period last year; deducting non-net profit decreased by 0.63% over the same period last year; 1) Gross profit margin increased significantly to 21.64%, rising for seven consecutive quarters, and gross profit margin is expected to continue to rise under the optimized procurement system. 2) the rate of sales management expenses increased from 1.30pp to 19.77% compared with the same period last year, and the pressure of labor, rent and operation is still obvious, and cost control will be the key to the recovery of the company's profitability; 3) the increase in gross profit margin exceeds the expense rate so that the net profit rate increases slightly to 0.70% for five consecutive quarters, and there is still a lot of room for improvement.
14-year business outlook: focus on cost control
The company will maintain the expansion strategy of community stores in first-and second-tier cities and hypermarkets in third-and fourth-tier cities. It is expected that the company will add 10 new stores and a net increase of 8 stores in 14 years, representing an area growth rate of about 8%. In the context of oversupply and e-commerce diversion, the company is expected to face more serious diversion pressure in the next few years, especially the same store growth pressure in Guangdong will continue. In the past 14 years, the company focuses on the improvement of internal efficiency with cost control as the core, and labor and rental costs are the core factors affecting the recovery of the company's net interest rate. From a quarterly point of view, the company suffered obvious losses in the second and third quarters of previous years; it is expected that profitability will improve in the second and third quarters, but the extent of loss reduction is the key to the recovery of profitability.
Profit forecast and investment suggestion
Affected by poor customer experience, serious homogenization, e-commerce diversion, oversupply, and rising cost rigidity, the gathering capacity and profitability of hypermarkets in first-and second-tier cities continue to decline; with the completion of a large number of commercial real estate in the next two years, the format of hypermarkets in third-and fourth-tier cities is also about to end the blue sea period of expansion, and the future performance growth space of hypermarkets is limited. We judge that the company will have a profit margin recovery process in 14 years after 13 years of smooth turnaround, and then it will enter a period of stable and low-speed development. Whether the company can innovate in the format (community stores, fresh / food / life stores for different customers, etc.) and seize the new generation of consumers is the core to judge the inflection point of the company in the future. Maintain the 14-16 EPS forecast to 0.08,0.08,0.09 yuan, and give it a "hold" rating.
Risk tips: same-store growth dropped sharply, labor, rental pressure increased.