In 16 years, the income decreased by 12%, the net profit decreased by 16%, and the revenue of the company narrowed by 502 million yuan in 2016, 11.50%, 13.0507 million yuan, 4.63%, 15.0602 million yuan, 16.61%, 0.04 yuan, and 0.10 yuan (including tax). The higher increase in deducting non-net profit than income is mainly due to the increase in gross profit margin and the decrease in the rate of management expenses, while the higher net profit is mainly due to the decrease of 4.19 million yuan in government subsidies included in the profits and losses of the current period.
From a regional point of view, the export income of fur in the past 16 years was 210 million yuan, down 21.85%, mainly affected by the economic downturn in Russia and neighboring countries; the domestic fur income was 172 million yuan, down 3.24%, mainly due to the expansion of the domestic market and the reduction in the unit price of clothing; other business income was 128 million yuan, down 2.46%, mainly due to the transfer of management rights in Wass Fur City and the decrease in revenue from the sale of shops in southern Beijing.
In terms of products, the revenue of fur clothing in the past 16 years was 292 million yuan, down 4.85%, accounting for 58.26% of the total income, and the sales of 69100 pieces of fur clothing increased by 1.47%. The income of fur Zhang, mink, fur accessories, fashion and other businesses were 61.02 million yuan (- 44.16%), 7.6 million yuan, 6.11 million yuan (- 53.34%), 6.04 million yuan (+ 223.50%) and 128 million yuan (- 2.46%) respectively.
The single-quarter income of 16Q1-Q4 increased by-16.16%,-13.38%,-16.18% and-1.87%, and the net profit returned to the mother increased by-26.18%, 221.20%, 95.02% and-36.22%, respectively. Q4 income decline narrowed, mainly due to Q4 domestic market peak season, domestic sales income increased; Q2, Q3 net profit growth due to operating tax and financial expenses reduced, gross profit margin increased significantly, Q4 net profit decline is mainly due to a sharp decline in gross profit margin, non-operating income decreased by 2.08 million yuan.
The gross profit margin and expense rate increased in 16 years, and the gross profit margin fluctuated greatly in a single quarter: the company's gross profit margin was 28.92% in 2016, an increase of 0.80PCT over the same period last year, mainly due to proper cost control under the whole industry chain model. The gross profit margins of fur export and domestic sales are 13.65 (+ 0.99PCT) and 38.36 (+ 1.28PCT) respectively, and the gross profit margins of other businesses are 40.17%. The reduction in 6.04PCT is mainly due to the decline in income from the transfer of management rights and the sale of shops in the high gross margin business.
The gross profit margin of 16Q1-Q4 is 45.74% (+ 10.97 PCT), 23.82% (- 0.83 PCT), 27.65% (+ 8.35PCT) and 21.44% (- 12.32PCT) respectively. The gross profit margin of 16Q1 fluctuates greatly in a single quarter, and the increase in gross profit margin of Q1 is mainly due to the contribution of Q1 domestic sales business with higher gross profit margin in the peak season, while the slight decline in Q2 gross profit margin is mainly due to the relatively high export share and low gross profit margin in the current quarter. The increase in Q3 gross profit margin is mainly caused by the business with higher gross profit margin, such as the transfer of management rights and rental income. The decline in Q4 gross profit margin is mainly due to the relatively high proportion of domestic sales revenue and increased promotion efforts by the company.
Expense rate: during the 16-year period, the expense rate increased by 1.65PCT to 25.04%, of which the sales expense rate increased by 1.15PCT to 10.05%, and the employee salary and store expenses increased slightly; the management expense rate decreased by 0.71PCT to 11.80%, mainly due to the decline in R & D expenses, wages and related expenses; and the financial expense rate increased by 1.21PCT to 3.19%, mainly affected by the 4.34 million yuan increase in loan interest.
Continuously improve the layout of the whole industrial chain of the fur industry
As a leader in the industry, the company has formed the layout of the whole fur industry chain, with overseas rare mink breeding, fur trading center, fur clothing production base, Wass Fur City, own brand direct store, Tmall flagship store, Voss Yi Superior, etc., covering animal breeding, raw leather trading, raw fur processing, fur clothing design and production, terminal retail, Internet financial services and other business to expand domestic and foreign markets.
1) overseas mink breeding business: the company has 8 mink farms in Denmark and Latvia, introducing foreign high-end mink varieties into China to cultivate excellent mink breeds suitable for large-scale breeding in China.
2) Fur Trading Center: with China Suning International Fur Trading Center, which was completed and opened in June 2014, with a construction area of 13.06 million square meters, 752 shops and about 844 open-air stalls, it is the largest fur trading market in China. The fur trading center has changed the original extensive business model of merchants. In the future, it is expected to introduce the international advanced raw leather trading model, implement the raw leather classification standard, and make the raw leather trading standardized, market-oriented and brand.
3) Fur production base: the company is the largest fur manufacturer in the world. On November 9, 2016, a non-public offering was completed, 37.08 million shares were issued, and 600 million yuan was raised for projects such as cleaner production platform, cleaner production warehousing base, and repayment of bank loans, to further improve the layout of production business and promote clean production of fur processing. and with the help of clean, cluster production platform to improve the influence on the upstream and downstream of the fur industry.
4) Woss Fur City: the first phase of Woss Fur City opened on November 18, 2013, with a floor area of 80,000 square meters, and the second phase opened in October 2015, with a construction area of 100,000 square meters. It is mainly composed of bags, leather clothing, cashmere, fur and other categories to build medium-and high-end factory stores; another Walsh Life Shopping Mall provides experiential shopping covering cinemas, boutique supermarkets, children's entertainment and leisure shopping.
5) own brand: focus on "Voss" and "Yijiaqi", among which "Wass" focuses on the high-end market, covering fur clothing and fashion; "Yijiaqi" as a professional fur brand focuses on the middle and high-end market, the products are fur clothing and its products. At present, it has a total of 13 direct stores, mainly concentrated in the central business district of large and medium-sized cities, while opening EGAKE flagship stores on Tmall platform to improve the layout of online channels.
6) Voss Yiyou: on June 25, 2015, the company contributed 3 million yuan (60%) with Youshe Technology and Yirongdeli to set up Voss Yiyou, which is involved in Internet finance and provides supply chain finance such as fur pledge financing. at present, the scale of the business affected by the tightening of Internet financial policy is still small.
Benefiting from the establishment of Xiongan New area, Wass Fur City store rental and sale revenue is expected to increase 2017.4.1 the CPC Central Committee and the State Council decided to establish Hebei Xiongan New area, including Xiong County, Rongcheng and Anxin County in Hebei Province and some surrounding areas. the starting area is about 100square kilometers, the medium-term development area is about 200square kilometers, and the long-term control area is about 2000 square kilometers. Xiongan New area has a low degree of development and strong carrying capacity of resources and environment. In the future, it will focus on dredging Beijing's non-capital functions, planning and building new modern urban areas, and exploring new models for optimal development of densely populated and economically densely populated areas. The establishment of the new area is a historic strategic decision made by the CPC Central Committee, and it is another new area of national significance after Shenzhen Special Economic Zone and Shanghai Pudong New area, which will promote the economic development of the surrounding areas in the future.
The company is located in Suning County, Cangzhou City, Hebei Province, south of Xiongan New District, less than 100 kilometers away from the new area and less than 150 kilometers away from Beijing Capital New Airport. The company owns Wass Fur City, with a total floor area of 180,000 square meters, and its income mainly comes from the sale and rental of shops. After the establishment of the new area, Wass Fur City will significantly benefit from the improvement of population flow and economic development in the areas around the new area, the value of commercial real estate will be revalued, and store rents and sale prices will likely rise, driving up other business income.
Actively expand the second main business of social e-commerce and invest in the e-commerce incubator to enrich the Internet business layout company began to expand the second main business of social e-commerce in 2015 to cultivate new performance growth points. 1) 2015.5 acquired a 30 per cent stake in Youshe Technology (that is, the main operating body of "micro-sell"), and micro-selling reached a strategic cooperation with Weibo Corp in July. Youshe Technology continues to expand its business, strengthening the ability of social e-commerce services to take control of Zhejiang Guangcan, an online celebrity incubator, Zhengzhou win Zhifan, a beauty makeup supply chain company, and Beijing Zhi Meili, a picture and video content company. In the past 16 years, Youshe Technology has achieved an income of 24.4332 million yuan and a net profit of 2.0192 million yuan. The average daily turnover of the micro-selling platform is 2.33 million yuan, and the average number of daily active people is 1.34 million.
2) 2016.8 will acquire a 10% stake in the future moment, and focus on the incubation of social e-commerce businesses in the beauty category, integrating celebrity incubation, fan operation and e-commerce management. It has a number of influential online celebrities, such as "Wang Yuepeng Niko", to improve coordination with the micro-selling business.
On March 30, 2017, the company announced that it plans to invest 120 million yuan to build an e-commerce incubator project. The incubator is located on the east side of Wass Industrial Park, covering an area of 467 million square meters and a construction area of about 5.0 million square meters. Mainly engaged in e-commerce incubation, supply chain and supporting facilities construction. After the completion of the e-commerce project, the number of shops available for sale or leasing will increase, and the suppliers, manufacturers and distribution centers of clothing, furs and their raw materials will be managed and technical guidance will be provided. provide online and offline distribution channels, information sharing, warehousing and logistics and other services, from the process to achieve data sharing among small and micro enterprises on the industrial chain, the source of income will be further enriched, and it is expected that rent and other income can be increased in 2017.
At present, the degree of Internet networking of the fur industry chain is low, and the information asymmetry between different subjects affects the efficiency of transaction, transportation, retail and so on. The company builds an e-commerce incubator, which can integrate and transmit the information and business of fur traders, producers, logistics providers, retailers and other nodes in the Wass Industrial Park and Suning Fur Trading Center. with the help of rich social e-commerce operation experience to improve the efficiency of the industrial chain, provide overall services for small and micro enterprises, and further enrich the company's source of income. The company will further integrate online and offline resources to provide fur merchants with solutions such as commodity sales and financial services, and online layout is expected to contribute more revenue.
In 17 years, the adjustment of the main industry of fur is expected to end, the layout of e-commerce continues to advance, and the income composition of the company of clean production and warehousing business accounts for 75% and 25% of the income of fur products respectively. OEM, ODM and OBM respectively account for 11.94%, 29.41% and 58.56% of fur products sales, of which overseas sales are dominated by OEM and OEM, while domestic sales are dominated by OBM.
Over the past 15 years, the Russian economic downturn has affected exports, and corporate revenue has continued to decline. We judge that it is expected to stabilize and pick up in 17 years. 1) OBM in the domestic market, dominated by direct sales and supplemented by shopping malls, the revenue from orders in July accounts for more than 50%. The decline in prices in 16 years leads to a slight decline in revenue. It is expected that product prices will gradually pick up after the inventory of downstream customers is gradually digested, and the revenue from orders in 17 years is expected to increase slightly. In the past 16 years, the revenue of 13 direct-operated stores has increased compared with the same period last year. In the future, the company will expand the direct sales channel, and the shopping mall consignment channel will remain stable, which is expected to lead to a slow increase in domestic sales revenue. 2) in overseas markets, the company's sales channels cover Russia, Europe, the United States, Japan, South Korea and other regions. Over the past 15 years, the Russian economic downturn has led to a sharp decline in the company's export revenue, with the low price of crude oil rebounding. Russia's economic growth is expected to stabilize, and Bloomberg expects Russia's economy to grow by 1.1% in 17 years.
The company will prudently expand its Russian customers on the basis of guaranteed payback, in addition, fur retail in Europe, the United States and Northeast Asia is expected to maintain growth, and the company's export revenue is expected to end adjustment or even pick up. 3) benefiting from the establishment of Xiongan New area, the real estate value of the company's Fur City is expected to be revalued, and rents and store sales revenue will be increased. On March 14, 2017, the company announcement was identified as the first batch of characteristic towns in Hebei Province, "Wass Fur Town", and plans to invest in e-commerce incubator to further expand other business income.
In terms of gross profit margin, the company controls costs under the whole industry chain model, and the export gross profit margin increases by 0.80PCT in 16 years. It is expected that with the improvement of the bargaining power of the external demand recovery company, the export gross profit margin will increase slightly, at the same time, with the gradual digestion of domestic customer inventory, it is expected that the price of orders will pick up in 17 years, in addition, after the establishment of Xiongan New area, the rent of Fur City will rise and the cost will be fixed, which will jointly promote the continuous increase of gross profit margin; in terms of expenses, the sales expenses are relatively rigid, and the company strengthens the control of management expenses, and the expense rate is expected to continue to decline after the income rebounds.
We believe that: 1) the main fur industry benefits from the development of domestic channels, the gradual recovery of external demand, and the establishment of Xiongan New area to boost leasing business, and its income is expected to return to growth; at the same time, thanks to the increase in gross profit margin and the decline in expense rate, the net profit in 17 years is expected to show a large increase. 2) the layout of e-commerce continues to increase. After investing in Youshe technology and laying out social e-commerce in the future, we will invest 120 million yuan to build an e-commerce incubation platform to promote the online and offline integration of the fur industry chain, which is expected to cultivate new performance growth points in the e-commerce field in the future. 3) A non-public offering was completed on November 9, 2016.The offering price was 16.18 yuan, of which the major shareholder he Guoying subscribed for 60 million yuan, accounting for 10%, and the sales limit period was three years, demonstrating confidence in the future development of the company.
It is predicted that the EPS in 2017-19 will be 0.06ax 0.10 PE, corresponding to 189x PE in 2017. at present, the company has a small market capitalization (4.365 billion yuan) and a high short-term valuation, but it is worth looking forward to maintaining the "overweight" rating considering the fixed price increase upside down, benefiting from the establishment of Xiongan New area and the future extension layout of the e-commerce field.
Risk tips: weak overseas demand, weak domestic consumer market, losses in social e-commerce business, and so on.