Event Company issues Annual report 2016 and first quarter report 2017

In 2016, the company achieved operating income of 846 million yuan, an increase of 92.94% over the same period last year, and net profit of-35.2501 million yuan, down 368.71% from the same period last year. Non-parent net profit was deducted from-40.1106 million yuan, and basic earnings per share was-0.08 yuan, down 366.67% from the same period last year. Of this total, the operating income in the fourth quarter alone was 419 million yuan, and the net profit returned to the mother was 29.5332 million yuan, an increase of 13.07 percent over the same period last year. The company plans not to distribute profits and increase equity through capital accumulation fund in 2016.

In the first quarter of 2017, the company achieved an operating income of 160 million yuan, an increase of 34.96% over the same period last year, and a net profit of-20.4571 million yuan.

A brief comment on the resumption of growth in the main business of health wine, and the annual loss caused by the decline of non-business income

The company has been involved in the health wine industry for about 20 years, and the "Coconut Island" brand enjoys a high reputation in the market. However, due to the company's strategy and other reasons, the company's main business revenue of health wine declined continuously from 2009 to 2014. In 2015, the revenue of the health wine business was basically flat. In 2016, the company refocused on the main health wine industry and increased brand promotion. The annual business income of the health wine sector reached 332 million yuan, a substantial increase of 29.21% over the same period last year.

As the three expense rates remain at a high level (15.68%, 8.68% and 1.42%), the company's operating profit for the whole year of 2016 is-27.5544 million yuan, which is basically the same as that in 2015 (- 25.0599 million yuan). However, due to the company's recognition of the income from debt restructuring in Golden Coconut Forest litigation in 2015, tax inspection, settlement of tax rebates and exemption of part of the late fee, and Chengmai Jinjiang land non-monetary exchange income, the non-operating income reached 39.1293 million yuan and the non-operating expenditure was only 1.2018 million yuan. In 2016, non-operating income dropped sharply to 11.2317 million yuan, while non-operating expenses rose to 5.5239 million yuan due to the loss of land disposal transfer in Xiazigou, resulting in a net profit loss of 35.2501 million yuan for the whole year.

Refocus on the main business of health wine, increase promotion and increase sales

The company's health wine is divided into medium-and high-grade (including deer turtle wine, Haikou Daqu series, original pulp wine series), medium-grade (Haiwang wine) and low-grade (three coconut spring, Hainan rice wine). Deer tortoise wine is also the main variety among the medium and high-grade liquors. In 2016, the sales volume of deer tortoise wine was 3,292 thousand litres, an increase of 98.17 percent over the same period last year, and the sales revenue was 111.494 million yuan, an increase of 66.00 percent over the same period last year. The sales volume of Haikou Daqu and original starch wine series was 232 thousand liters, an increase of 363.64 percent over the same period last year. Sales revenue reached 38.1448 million yuan, an increase of 693.03 percent over the same period last year. Sales of mid-range Haiwang wine fell by 0.62%, basically flat. The sales of low-grade wine was 3,499,000 liters, an increase of 98.28 percent over the same period last year, and the sales revenue was 30.1573 million yuan, an increase of 77.43 percent over the same period last year. The company's health wine sales have achieved a substantial increase.

The company carried out large-scale brand promotion and promotion activities for health wine products in 2016, with advertising expenses of 36.5937 million yuan, an increase of 71.18 percent over the same period last year, and promotion expenses of 11.652 million yuan, an increase of 45.02 percent over the same period last year. However, with the help of lower costs and product structure upgrading, the company's overall gross profit margin of alcohol products reached 53.00%, an increase of 4.51pct over the same period last year, and further improvement in profitability.

For the sales of health wine, the company adopts the mode of dealer agent-based, self-management and group purchase and other direct sales channels. The company vigorously promoted online channels in 2016, focusing on medium-and high-grade products. Among them, Tmall flagship store achieved sales revenue of 2.4141 million yuan, an increase of 1141.12% over the same period last year, while JD.com flagship store achieved sales revenue of 1.1103 million yuan, an increase of 3.1971 million yuan over the same period last year. In the future, the company will continue to attach importance to the development of e-commerce channels.

Under the influence of increased brand promotion in 2016, the company's operating income in the first quarter of 2017 was 160 million yuan, an increase of 34.96% over the same period last year, while the loss was reduced to-20.4571 million yuan from-27.9624 million yuan in the first quarter of 2016.

Profit forecast and valuation

The company refocused on the main business of health wine, increased its promotion efforts, and its sales revenue increased significantly. As a traditional health wine brand enterprise, the company has a certain consumer base. Through the expansion of e-commerce and other emerging channels, it will bring new growth momentum and give the company a rating.