In 16 years, the income fell by 31%, and the net profit returned to the mother decreased by 67%, which is under continuous adjustment.

In 2016, the company achieved revenue of 696 million yuan, down 31.27% from the same period last year, and the net profit returned to the mother was 7.4686 million yuan, down 66.93% from the same period last year. The non-return net profit was-51.2137 million yuan, an increase of 12.75% EPS0.02 yuan over the same period last year. The decline in net profit from home is higher than that of income, mainly due to the sharp decline in gross profit margin and the increase in the rate of management expenses (0.67PCT). The growth rate of non-return net profit is higher than that of non-home net profit, which is mainly due to a 41.92% decrease in profit and loss on the disposal of non-current assets.

The income of 16Q1-Q4 company increased by-28.64%,-33.55%,-33.07% and-30.69% respectively, and the net profit returned to the home increased by 9.78%, 4491.90%,-197.33% and-120.79%, respectively. Terminal consumption remained in the doldrums, the company continued to close stores and increased promotion efforts led to a continuous decline in revenue, a significant decline in 16Q2 and Q4 gross profit compared with the same period last year, and a year-on-year increase in sales expense rate, which dragged down the net profit performance, among which the external sale of Q2-owned stores led to a substantial increase in home net profit.

More than 60 stores were closed in 16 years, and the tilt of production capacity to customization led to a decline in exports.

The company's income mainly comes from domestic brands and processing and export business. Domestic brand channels include joining, direct marketing, group buying and e-commerce. The company continues to close substandard stores and improve their profitability. At the end of 2016, there were about 490 channels, including more than 470 franchised stores, 20 directly operated stores and a reduction of more than 60 stores. In 16 years, the company's group-buying business income is about 200 million yuan, accounting for about 30% of the total revenue, while e-commerce income accounts for less than 1%. Due to the tilt of the company's production capacity towards customized business and the reduction of export orders, export revenue fell by 43.70% in 16 years.

In terms of weight price, the company's clothing sales fell 29.69% in 16 years compared with the same period last year, and the corresponding price decreased by 3.27%. The downturn in terminal consumption has led to a decline in the volume and price of the company's clothing products.

The gross profit margin has dropped sharply, the expense rate is generally stable, and non-operating income has declined.

Gross profit margin: gross profit margin decreased by 7.67PCT to 19.97% in 2016 compared with the same period last year, of which domestic brand sales and export gross profit margins fell by 13.47PCT and 1.41PCT respectively. Domestic sales are mainly affected by increased terminal promotion efforts and increased profits to franchisees, and exports are affected by the decline in foreign trade order prices. 16Q1-Q4 gross profit margin is 28.09% (- 0.67PCT), 16.27% (- 17.22PCT), 16.82% (- 2.27PCT), 16.21% (- 13.66PCT).

Expense rate: during the 16-year period, the expense rate increased from 0.02PCT to 27.77% compared with the same period last year, in which the management expense rate also increased to 7.97%, and the sales expense rate decreased to 19.05%, mainly due to the closure of shops and the reduction of expenses. The financial expense rate also decreased to 0.76%, mainly due to the reduction of interest expenses caused by the early repayment of bonds.

Other financial indicators: 1) inventory increased by 3.48% to 362 million compared with the beginning of the year, of which raw materials and inventory goods increased by 25.14% and 20.78%, respectively, and inventory turnover was 1.65%.

2) accounts receivable decreased by 26.33% to 325 million yuan compared with the beginning of the period.

3) non-operating income also decreased by 31.73% to 74.2166 million yuan, mainly due to a 41.44% decrease in the disposal of non-current assets compared with the same period last year.

4) the net cash flow of operating activities decreased by 65.22% to 53.0496 million yuan compared with the same period last year, mainly due to the decrease of income and the decrease of cash inflow from operating activities compared with the same period last year.

The adjustment of the main business channel continues to develop personalized customization business.

In the face of the depressed market environment, the company will further integrate the existing channels, strengthen the fine management of marketing terminals, and increase support for franchisees to enhance single-store sales. The operating profit of 16Q4 is-16.4997 million yuan, and the profitability of some channels is still weak. In 2017, the company plans to sell or lease no more than 29 purchased shops (the acquisition cost does not exceed 850 million yuan) at the fair market price or the estimated price.

In terms of group purchase business, the company expands the scope of group purchase business and the number of customers, gradually realizes group purchase market coverage throughout the country, and increases the development of group purchase customers in finance, insurance and other fields; in terms of export, the company actively participates in international exhibitions, increases the number of fabric and clothing developers for the international market, strengthens cooperation with British and Italian design teams, and constantly expands new customers abroad.

The company vigorously develops multi-brand full-product customization business, focusing on high-quality and affordable prices, and promotes its Planio premium customization business, royal bridegroom wedding customization business and Sinur personalized full-category customization business. The company organizes senior Italian physicists to carry out national store inspection and customization business, speed up the network layout of customized stores, and increase the proportion of customized products in franchise stores. In the future, with the continuous upgrading of personalized consumption, the company's customization business is expected to develop.

It is expected that 17Q1's performance is still at a loss and will continue to sell stores, and there are still expectations of transformation in the future.

The company expects to still lose money from January to March 2017, realizing a net profit of-14 million yuan to-8 million yuan, with a year-on-year change of-368.78% to-253.59%, mainly due to the decline in income caused by the downturn in terminal consumption. the gross profit margin decreased as a result of increased sales promotion, higher labor costs and lower prices for group customization orders.

We believe that: 1) in terms of main business, the company is still in the adjustment stage, and we look forward to continuously optimizing sales channels, vigorously expanding overseas customers and developing customized business and e-commerce. 2) No more than 29 stores are planned to be sold / leased in 16 years, and one is actually sold and 22 are leased, with a total confirmed income of 107 million yuan. The company plans to lease / sell no more than 29 stores in 17 years, contributing income from the disposal of non-current assets to improve performance. 3) after 2015, the company suspended its trading for many times to plan for restructuring. Among them, 15.9.7 suspended its trading plan to acquire Xinghe Interconnection, 16.4.23 announced that the acquisition was terminated due to the failure of both parties to reach an agreement on the company's development strategy; on November 7, 2016.11.7, the controlling shareholder, bridegroom Sinur Group planned to transfer the controlling stake, but the transfer was terminated due to differences in the transaction price. At present, the company's main business continues to be in the doldrums, and we judge that there are still expectations of transformation, mergers and acquisitions, equity transfer and so on in the future.

Affected by the weak environment of menswear consumption, the main business is still at a loss, and the sale / rental of shops is expected to contribute to the performance. Forecast 17-19 EPS0.02, 0.03,0.05 yuan, corresponding to 17-year PE865 times, the current valuation is high, "neutral" rating. Pay attention to the expectations of future transformation.

Risk hint: the progress of M & An in transformation is not as expected, and the consumption of men's wear continues to be weak.