I. Overview of events
The company released its annual report that its operating income for the whole year was 6.71 billion yuan, an increase of 3.41 percent over the same period last year, and its net profit was 54.3836 million yuan, up from-374 million yuan in 2015.
II. Analysis and judgment
Substantial growth in performance, supply chain integration helps increase gross profit margin
The main reasons for the company's performance growth include: 1) strengthening supply chain management to enhance commodity competitiveness, focusing on optimizing consumer shopping experience, focusing on improving human efficiency, turf efficiency and cost efficiency; 2) Jiuai Zhihe, which was acquired in 2015, consolidated tables and contributed profits in 2016; 3) increased income from the transfer of 19.50% equity interest in Changsha Zhongpan Real Estate Co., Ltd. 4) Ji Ti Hechang (Fujian) Real Estate Development Co., Ltd., Changsha Wuyi Real Estate Co., Ltd. On the other hand, benefiting from direct supply / production area direct mining, the improvement of the proportion of integrated production, the development of own brands, and the fine management of fresh goods in supermarkets, the company's comprehensive gross profit margin rose to 21.61% in 2016, an increase of 1.14 percentage points over the same period last year. The rate of the three expenses totaled 21.15 percent, down 2.81 percent from the same period last year, mainly due to increased fees for closing stores in 2015, rent reduction and improvement of human efficiency in 2016. We believe that the company may continue to strengthen supply chain integration and further enhance its competitiveness in the future.
Layout of new retail formats to comply with the trend of consumption upgrading
At the end of 2015, the company launched a new business format "Neighbourhood" Community Life supermarket, relying on its own supply chain advantages to build a community platform integrating leisure, shopping, light meals and services, attracting a large number of consumers pursuing quality, fashion and other shopping experience. In addition, the company is actively preparing the New Huadu Seafood Club, a seafood restaurant that integrates catering and fresh retail, which is positioned as a new professional social catering industry, that is, catering-based, supplemented by the sale of ingredients, while the core lies in the social platform. The Seafood Association is expected to integrate and develop with a variety of business forms of the company, forming a drainage effect. We believe that in the future, the company may further deepen the layout of new retail formats such as "neighborhood gathering" and "Seafood Club" to comply with the trend of consumption upgrading.
Deep ploughing in the field of e-commerce operation, online and offline integrated development
In January 2016, the company completed the wholly-owned acquisitions of Jiuai Zhihe, Jiuai Tianjin and Luzhou Zhihe. Together, the three companies have formed a complete business combination of e-commerce operation services, Internet omni-channel sales, and Internet omni-channel sales of customized products, which can meet the personalized needs of different customers or different stages of the same customer. The acquisition will help the company improve its layout in the e-commerce field, combine its own resources with the Internet thinking of the three companies and the advantages of big data, and promote the development of online and offline integration. We believe that in the future, the three companies will continue to give full play to their advantages in digital marketing, e-commerce operation and data analysis to help companies expand their online sales scale and brand influence, and contribute to their performance at the same time.
Third, profit forecast and investment suggestions
The company actively arranges new business type to comply with the trend of consumption upgrading. Deep ploughing the field of e-commerce operation to form a new profit growth point. It is estimated that the EPS for 2017-2019 will be 0.13 + 0.16 + 0.21 yuan, corresponding to the PE of 63-51-39, maintaining the "highly recommended" rating.
IV. Risk hints
New business type's expansion fell short of expectations, and the performance of e-commerce agents was lower than expected.