Performance review
Combined factors have accelerated the growth of income and raised the gross profit margin to
Gujing Gongjiu announced 1H16 results: operating income 3.045 billion yuan, year-on-year increase; net profit belonging to the parent company 431 million yuan, an increase of 13.29%, corresponding to 0.86 yuan per share. The revenue growth rate of the original Gujing tribute wine was slightly lower than expected, mainly affected by the off-season in the second quarter, and the profit growth rate was in line with expectations. 2Q16 revenue growth increased to 14.9% from the first quarter, mainly due to the one-time impact of the Yellow Crane Tower.
The gross profit margin increased to 74.37%, mainly from cost control, and increased the net profit margin to 14.16%.
Trend of development
The growth in Anhui Province tends to slow down. Vintage raw pulp continues to enjoy the consumption upgrading of county and township markets in the province for 5 years, and it meets the demand of urban consumption upgrading for 8 years, and is expected to further increase the sales scale at the price of 100 to 200 yuan, while low-grade wine begins to decline due to weak demand. However, the company faces competition from local brands such as Kouzi cellar, golden seed wine and Yingjiagong wine in the province, as well as attacks from foreign brands such as Yanghe, and revenue growth is expected to slow to 8% in the next two to three years.
Profitability has improved significantly, and there is room for a decline in the expense rate in the future. The improvement of the company's profitability mainly comes from the increase of gross profit margin brought about by cost control. The company still implements the channel subsidy model, plus the cost investment brought about by the Yellow Crane Tower marketing, and the cost remains high in the short term. However, with the completion of the scale effect and the reconstruction of the Yellow Crane Tower marketing system, the expense rate will gradually decline in the future.
The acquisition and contribution will continue to 1H17. The Yellow Crane Tower began to enter the consolidated statement in May 16, and the contribution will continue until the first half of 2017. At the same time, according to the gambling agreement signed by Gujing for the acquisition of the Yellow Crane Tower, the income of the Yellow Crane Tower will grow at an average annual rate of more than 20% in the next five years, which is conservatively estimated to be 15%, which will still bring a marginal boost to the growth rate of consolidated income.
Profit forecast
We raised our earnings per share forecast by 2.33% to 1.62 yuan from 1.59 yuan in 2016 and from 1.85 yuan to 1.92 yuan in 2017. Mainly from the Yellow Crane Tower and table factors.
Valuation and suggestion
Currently, the company's share price corresponds to the 2016 26.9x Pmax E. We maintain the recommended rating, but raise the target price by 19.38% to RMB54.2, which is more upside than the current share price. The target price corresponds to 28.2x Pbig E in 2017.
Risk.
The sales of medium-and high-grade wines in Anhui Province are not up to expectations.
