The main business is under pressure, closing shops sharply in 2015 to reduce losses. As of 2016H1, the company has 129 stores, including 120 supermarkets and 9 department stores, mainly distributed in Fuzhou, Xiamen and other areas of Fujian Province. In recent years, due to the impact of e-commerce and rising rents and labor costs, business performance continued to be under pressure, with revenue reaching 6.49 billion yuan in 2015, but due to the closure of 14 stores, one-time amortization of decoration expenses, compensation for liquidated damages and losses of fixed assets, resulting in a net profit of 374 million yuan in 2015.
The acquisition of Jiuai series of companies, cut into the fast-growing e-commerce operation industry. The company acquired three e-commerce agency operators for 780 million yuan in January 2016. The market size of e-commerce agency operation exceeded 420 billion yuan in 2015 and is expected to exceed 2 trillion yuan in 2020. At present, the brands operated by Jiuai series companies include Quanyou Home, Luzhou laojiao, Yunnan Baiyao, Mars, China Resources and other brands, and the GMV in 2016 is expected to exceed 1 billion yuan, ensuring the completion of the promised net profit. At the beginning of its establishment, Jiuai company was positioned at the market scale with high gross profit margin, relatively weak Internet and sufficient market scale. at first, it operated as a brand's Tmall flagship store, then did product buyout and distribution model, and then made C2B product customization. continue to develop in the direction of higher discourse power, bargaining power and gross profit margin.
Layout sports monopoly and sports lottery business. In 2012, the company signed an exclusive brand agreement with Intel Sports, which can open Intel sports stores in 15 provinces and cities, as of 2016Q3, 13 in Fujian Province, 1 in Zhejiang and 1 in Jiangsu. In December 2013, the company signed an agreement with Fujian Welfare Lottery Distribution Center to carry out agency sales of welfare lottery tickets in the company's shopping malls and supermarkets, involving nearly 2500 terminal lottery cashiers. We believe that the company's sports business will rely on the advantages of offline stores to carry out more event operation business, by constantly improving the event operation ability to create its own event IP, so as to greatly promote the sales of offline sports stores and form a positive interaction.
Profit forecast and valuation: the EPS of the company from 2016 to 2018 is 0.47,0.24,0.29 yuan respectively, and the corresponding PE is 25.04x, 49.28x, 40.81x respectively.
Risk hint: the main business continues to decline; e-commerce operation and sports business are not as expected.