Maintain the "overweight" rating. The performance is slightly lower than expected. Taking into account the depressed overall prosperity of the men's wear industry and the continuous adjustment of the company's channels, the EPS for 2017-18 is lowered to 0.06 yuan, and the EPS for 2019 is forecast to be 0.06 yuan. Considering that the company has more early transformation actions, the future extension development determination remains unchanged, there is still a strong expectation of transformation, give a certain valuation premium, maintain the target price to 24 yuan, maintain the "overweight" rating.
After deducting non-post-loss for the third year in a row, the company's main clothing business is still in the adjustment period. The company's income in 2016 was 696 million yuan, down 31.27% from the same period last year; the net profit belonging to the shareholders of the parent company was 7.4686 million yuan, down 66.93% from the same period last year; and the net loss was 51.2137 million yuan, deducting non-post-loss for three consecutive years. The year-on-year decline in revenue was mainly due to the company's optimization of marketing channels and the closure of loss-making stores (more than 60 stores were closed in 2016). The overall return net profit is mainly due to the company's non-operating income from the sale of stores in Beijing and the rental of some shops in 2016. In the context of the weak consumer demand for traditional menswear and the overall weakness of terminal retail, the company will continue to adjust its main products, channel structure and develop multi-business models such as customization. At present, the profitability of the remaining channel stores is good, and the pace of closing stores is expected to slow down in 2017.
Capital operation moves frequently in the early stage, and there are still strong expectations of transformation and reorganization in the future. The company announced in 2016 that the original planned acquisition of the Xinghe Interconnection project was terminated, but the willingness to merge similar main assets in the future is not strong, and it pays more attention to emerging industries such as artificial intelligence and big data. The men's wear industry as a whole is still in a downturn, and it is expected that in the future, when the growth space of the traditional main business is obviously limited, the company is determined to extend the second main business in the future, and it will seek new profit growth points, and the expectation of transformation is strong.
Risk hint: the progress of the company's transformation is lower than expected.