The income increased by 12.45%, the net profit decreased by 44.50%, and the decline of gross profit margin dragged Q3 into a loss in a single quarter.
From January to September in 16 years, the company achieved an income of 450 million yuan, an increase of 12.45% over the same period last year, and the net profit returned to its mother was 9.76 million yuan, down 44.50% from the same period last year. The non-net profit was 6.04 million yuan, down 59.65% and 0.08 yuan from the same period last year. Profit growth is significantly lower than income, mainly due to a decline in gross profit margin. The difference in net profit before and after deducting non-profit mainly comes from the increase of government subsidies and the income of financial products.
Revenue growth: 1) the progress of opening stores slowed down in the first three quarters of 16 years, adjusted some unprofitable stores to optimize the channel structure, and the number of direct sales and distribution stores remained stable. 2) the company is equipped with a professional team to strengthen the development of group purchase business. the group purchase income in the first three quarters is about 3000-40 million yuan, which has exceeded 15 years (29.15 million yuan). 3) the revenue of e-commerce exceeded 100 million yuan, an increase of about 12% over the same period last year, and the revenue of e-commerce reached 163 million yuan in 15 years.
Quarter by quarter, 15Q1-16Q3 revenue growth rate is-12.93%,-18.81%,-14.93%,-1.30%, + 0.73%, + 29.71%, + 9.82%, and home net profit growth rate is-25.44%,-74.77%,-32.79%, + 19.51%, + 8.36%,-3.36%,-101.57%. In the past 16 years, the company has stepped up sales promotion and expanded its group-buying business, and its revenue has continued to grow in the first three quarters. 16Q3 gross profit margin fell sharply compared with the same period last year. 6.93PCT led to a loss in the main business, deducting non-net profit of-1.03 million yuan per quarter.
Gross profit margin has declined significantly, expense rate has decreased compared with the same period last year, inventory pressure has been reduced, and cash flow has declined.
Gross profit margin: 16Q1-Q3 gross profit margin is 36.62%, down 5.41PCT from the same period last year, the main reasons are as follows: 1) fierce competition in the industry, the company has stepped up the promotion of the main home textile industry; 2) the significant growth of group purchase business has led to an increase in the proportion of income from products with low gross profit margin, pulling down the overall gross profit margin. The gross profit margin of 15Q3-16Q3 is 40.92% (- 1.18PCT), 40.73% (- 1.17PCT), 39.53% (- 3.59PCT), 36.73% (- 5.42PCT) and 33.99% (- 6.93PCT).
In 2012-14, the company strengthened cost control and increased the proportion of revenue from network channels with high gross profit margin, which led to an upward trend in gross profit margin, but its performance continued to decline since 13 years. In 16 years, the company took the initiative to adjust its strategy and strengthen its cost-effective advantage. step up promotion efforts to promote the increase of market share, and the proportion of group buying business income with low gross margin increased, resulting in a significant decline in gross profit margin compared with the same period last year. It is expected that after 16Q4, the company will maintain the existing promotion efforts and improve profitability through channel optimization, and the proportion of group purchase income will gradually stabilize, and the overall gross profit margin is expected to remain flat and gradually pick up.
Expense rate: during the 16Q1-Q3 period, the expense rate was 33.26%, which decreased 2.73PCT compared with the same period last year, in which the sales expense rate was 21.14%, the year-on-year decrease of 1.50PCT, the management expense rate of 12.07%, the year-on-year decrease of 1.50PCT, and the financial expense rate of 0.06%, which increased 0.28PCT over the same period last year. The company strengthens the cost control, optimizes the channel structure, and promotes the decrease of the cost rate of the main home textile industry compared with the same period last year, but the drag of new business investment reduces the rate of expense. The 16Q3 sales, management and financial expense rates are 21.19% (+ 0.33%), 11.84% (- 1.19%) and 0.15% (+ 0.40%), respectively.
Other financial indicators:
1) in terms of inventory, the inventory at the end of the third quarter decreased 0.13% to 222 million yuan compared with the beginning of the year, the inventory turnover rate was 1.28, an increase of 0.12% over the same period last year, and the inventory / income ratio was 49.31%, compared with 58.80% in the same period last year. The inventory pressure has been reduced after the increase of sales promotion.
2) accounts receivable was 59.77 million yuan, an increase of 29.24% over the beginning of the year.
3) the loss of asset impairment increased slightly by 2.72% to 1.63 million yuan compared with the same period last year.
4) Investment income increased by 213.53% to 3.22 million yuan compared with the same period last year, mainly due to the increase in income from wealth management products.
5) non-operating income decreased by 30.21% to 1.8 million yuan compared with the same period last year, mainly due to the reduction of government subsidies in the current period.
6) the net cash flow of operating activities was-65.59 million yuan, down 102.57% from the same period last year, and-32.38 million yuan in the same period last year.
IP derivatives business continues to expand and is expected to contribute to performance in 17 years.
The company began to expand the operation of Internet vertical e-commerce and IP derivatives in early 2016. At present, the investment in new business has exceeded 10 million yuan, which is in the early stage of exploration. 1) HBDIY, the Internet vertical e-commerce platform launched by 2016H1, has been put into operation, but it is still in the stage of trial operation and has not yet contributed its performance. The company will appropriately explore the operation mode of the platform on the basis of ensuring the overall profit. 2) the company continues to promote cooperation with IP, such as Internet well-known IP, star artists, music platform, video platform, game platform, second-dimensional platform, etc., and deeply cut into the realization of IP derivatives. At present, the company has worked with Garfield, Cherry Meatball, Princess Barbie, Thomas Train and other animation IP to jointly develop home textile products and other derivatives, the number of well-known IP cooperation has further increased, and online channels focus on promoting animation IP home textile products, driving the sales growth of home textile products.
At present, the cultivation of home textile brand awareness and industry integration is in a lower stage, the industry competition is fierce, home textile enterprises have tried the water of emerging industries to seek greater development space. As one of the emerging areas, the development of IP derivatives has developed rapidly in recent years. In 2015, the size of China's brand licensing market was 7.61 billion US dollars, an increase of 23.94 percent over the same period last year. Home textile products have the characteristics of high value and strong user stickiness, which can be closely combined with the form of derivatives and IP realization. The company makes use of the huge value of IP fan economy, combined with its own product advantages to cut into the field of IP derivatives operation, new business growth space is larger. At present, there is little contribution to the income of animation IP home textile products, and it is expected that the increase in cooperation IP and categories in 2017 is expected to lead to performance growth.
It is expected that the 16-year net profit will drop by 45% to 15% compared with the same period last year, focusing on the promotion of IP business.
We believe that: 1) Home textile, the company takes the initiative to increase sales promotion in a highly competitive environment, and the current net profit has declined to a large extent. In the future, the company will maintain the existing discount, focusing on cost-effective home textile market in second-and third-tier cities. The company pays attention to the quality and profitability of the channel, the number of stores will remain stable, channel optimization is expected to promote the same store, e-commerce, group purchase business will also continue to make efforts, the future home textile revenue will maintain low growth, profitability is expected to improve. 2) IP derivatives operation, the company transformed into well-known IP derivatives operators, constantly increasing the number of animation IP cooperation, promoting the growth of home textile products sales. In the future, the company's in-depth cooperation with more strong IP, such as star artists, is expected to hit the ground, further expanding in the number of cooperative IP and derivatives categories, and the new business is expected to contribute to the performance in 2017.
On June 13, 2016, 28.98 million restricted shares held by 35 shareholders were lifted and listed in circulation, and some shareholders began to reduce their holdings. From June to July 2016, director Zhang Wen, director Zhang Haiying, shareholder Dachen Caixin and Dachen Venture Capital reduced their shareholdings one after another. On September 27, 2016, the company received a notice that Dong Secretary Zhao Chuanmiao reduced his holdings by 60900 shares, accounting for 0.05% of the total share capital, with an average reduction price of 39.95 yuan, while supervisor Wu Ying reduced his holdings by 30500 shares, accounting for 0.03% of the total equity, with an average reduction price of 40.88 yuan. By the end of the third quarter, a total of four individual shareholders had reduced their holdings by 645700 shares, accounting for 0.54 per cent of the total share capital. Institutional shareholders Dachen Caixin and Dachen Venture Capital planned to reduce their holdings by no more than 9.1 million shares by January 28, 2017, accounting for 7.58 per cent of the total share capital.
On October 13, 2016, the company lowered its forecast for net profit growth in the first three quarters of 16 years from-25% to-45%. This is mainly due to the drag on the Internet vertical e-commerce business and the decline in gross profit margin in the main business. The company expects 16-year net profit to increase by-45% and 15% year on year. Due to increased promotion efforts, the increase in the proportion of group purchases and other factors led to a higher-than-expected gross profit margin, we downgrade the 2016-18 EPS forecast of 0.19pm 0.23x0.25 yuan, with a high short-term valuation, but considering the great growth potential of Internet vertical e-commerce and IP derivatives business, we are expected to contribute to the performance and maintain the "overweight" rating in 17 years.
Risk Tips:
Marketing network expansion is not as expected, IP derivatives development business is not as expected, Internet vertical e-commerce investment affects performance, and so on.