The performance was lower than expected
Jinfeng Wine Industry announced its 2016 results: operating income was 1.075 billion yuan, up 0.8% from the same period last year; net profit belonging to the parent company was 67 million yuan, down 13.3% from the same period last year, corresponding to 0.13 yuan per share. At the same time, the 1Q17 performance was announced, the revenue was 297 million yuan, down 11.43% from the same period last year, and the net profit was 54 million yuan, down 13.88% from the same period last year. The performance is lower than the market expectation.
Trend of development
Revenue in Shanghai fell 4.3% for the whole year, mainly due to the Shikumen series. 1) Shikumen series products and structure are not updated in time, and there are signs of aging. Brand positioning puts too much emphasis on Shanghai-style culture, so it is difficult for consumer groups to expand. 2) the competition in the Shanghai yellow rice wine market is becoming fierce. Brands such as Guyue Longshan, Huaiji Mountain and Black felt Hat have all increased their marketing investment in Shanghai, with mainstream product prices ranging from 15 to 20 yuan and Shikumen mainstream products all above 20 yuan, so it is difficult to highlight the performance-to-price ratio. Continued to decline in the first quarter. The company will optimize the product structure and brand promotion of the Shikumen series, but it is expected to decline slightly by about 2% for the whole year. 3) the "golden years" and "harmony" series of mid-range prices have achieved steady growth.
Gross profit margin is under short-term pressure, but costs are gradually brought under control. 1) rising costs and declining product structure have led to a drop in gross profit margin of 1.3ppt to 47.2% for the whole year, which is expected to continue to be under pressure in the next 2-3 years. 2) to establish a professional channel company with Yiyatong, the cost of sales will be more reasonable. 3) with the consolidation of the technical renovation project, the warehousing-related expenses, which account for 10% of the management costs, will be gradually reduced.
The market outside the province is worth looking forward to. Revenue in Jiangsu and Zhejiang increased by 28% and 56% in 2016. The company optimized the production and sales system of Zhentai and Baita and set up a sales branch in Wuxi to improve the efficiency of operations outside the province. The company will continue to promote the growth of Huiquan and Baita in their respective advantageous areas, introduce "he" wine series, and continue to expand to Jiangsu, Zhejiang and southern Anhui, and is expected to achieve about 10% growth in non-provincial income in 17 years.
Profit forecast
We cut our earnings per share forecast for 2017 and 2018 by 14% and 15% respectively from RMB 0.16 and RMB 0.17 to RMB 0.14 and RMB 0.15 respectively.
Valuation and suggestion
At present, the company's share price corresponds to 5.3x Pmax S in 2017. We maintained a neutral rating, but lowered our target price by 6.82% to 12.30 yuan, which is 7.42% upside from the current share price. The target price corresponds to the 2018 5.5x Ppuma S.
Risk.
The company's product launch and channel construction in the Shanghai market are not successful.
