This report is read as follows:
The company announced the 2016H1 results, and the net profit belonging to the parent company increased by 421.94% compared with the same period last year. It is mainly due to the substantial increase in non-recurring profit and loss income caused by the sale and rental of stores by the company, the company's main business adjustment is in progress, and the focus is still in transition in the future.
Main points of investment:
Maintain the "overweight" rating. The company's performance is in line with expectations, maintaining the forecast that the EPS for 2016-17 will be 0.09 yuan 0.11 yuan, and the forecast EPS for 2018 will be 0.13 yuan. Considering that the company's original proposed acquisition of the Xinghe Interconnection project is terminated, the future extension development determination remains unchanged, there is still a strong expectation of transformation, a certain valuation premium is given, the target price is raised to 24 yuan, and the "overweight" rating is maintained.
The performance improvement is mainly due to the sale of stores, and the company's main clothing business structure is still being adjusted. The company's 2016H1 operating income was 351 million yuan, down 30.68 pct from the same period last year; the net profit belonging to the shareholders of the parent company was 27.2743 million yuan, up 421.94 pct from the same period last year; and the net loss after deducting non-profit was 21.1088 million yuan, down 617.39pct from the same period last year. The decline in revenue from the same period last year was mainly due to the company's optimization of marketing channels and the closure of loss-making shops, while the increase in net profit was mainly due to non-operating income from the sale of stores in the first half of the year. It is expected that under the background of the continuous decline in the prosperity of the traditional men's wear industry and the overall weakness of terminal retail, the company will continue to adjust the main products and channel structure, close loss-making shops and improve the overall operational efficiency.
The acquisition of the Xinghe interconnection project is terminated, and the future is still in a strong transition expectation. The company announced in the first half of the year that the original plan to acquire the Xinghe interconnection project was terminated. We believe that the company's menswear industry growth is weak, the economy continues to be in the doldrums, this year, the menswear manufacturing purchasing managers' index (PMI) is below the critical point, in the recession area, July index value is 49.20 points, down 0.49 percent from the previous month, down 0.70 percent from the same period last year, the overall menswear manufacturing industry is still in a contraction trend. It is expected that in the future, when the growth space of the traditional main business is obviously limited, the strategic determination of extension development will remain unchanged, the company will seek new profit growth points in the future, and the transformation expectation is strong.
Risk hint: the progress of the company's transformation is lower than expected.