Events:
On April 23, Hunan and Hubei released the 2012 annual report, showing that in 2012, Company 2 realized operating income of 1.3787724 billion yuan, an increase of 144.0318 million yuan over the previous year, an increase of 11.66 percent over the previous year, and a total profit of 150.3618 million yuan, an increase of 1268.05 million yuan over the previous year, an increase of 9.21 percent over the same period last year. The net profit belonging to shareholders of listed companies was 10862.91 million yuan, an increase of 1550.04 yuan over the previous year and an increase of 16.64 percent over the same period last year. The company intends to distribute cash of 0.80 yuan (including tax) for every 10 shares to all shareholders, with a total of 32 million yuan to shareholders, and use the capital accumulation fund to increase 10 shares for every 10 shares to all shareholders.
Comments:
The operating environment is under pressure, and the company's full-year growth in 2012 is lower than the previous forecast of 20%. Judging from the company's quarterly data, the company's operating income grew by only 5.3% in the fourth quarter of 2012, while operating profit fell by 53.3%. Net profit fell 41.6%. This means that Hunan and Hubei have shown signs of declining performance in the fourth quarter of last year. The company's first-quarter 2013 results forecast that the first-quarter net profit is expected to lose 55 million yuan to 70 million yuan, under the pressure of the "three public" consumption reduction and the impact of the market's frugal food consumption orientation, the first quarter of 2013 is likely to be the largest single-quarter loss in the company's history.
The growth rate of the main catering business declined significantly in 2012, and the growth rate of the company's main business-catering service business dropped to 7.03%, the lowest in nearly three years, and achieved single-digit growth for the first time. We speculate that excluding the impact of group meals and fast food business, the revenue scale of high-end Chinese food and beverage has dropped by about 1.94% compared with the same period in 2011; by the end of 2012, the company has 26 directly operated "Hunan and Hubei" brand restaurants in Beijing, Shanghai, Wuhan, Xi'an, Nanjing and other places; "Hunan and Hubei sentiment" and other brands have joined 9 stores. Among them, the annual revenue of Beijing stores in the leading area fell 2.97 per cent to only 774 million yuan, accounting for more than 60 per cent of Chinese food and beverage, thus dragging down the growth of the sector.
Business format transformation is difficult to see significant results in the short term in 2012, Hunan and Hubei situation has begun to transform from high-end catering to public catering through a series of foreign acquisitions. In July, the company entered the group food business by acquiring a 100% stake in long Dehua, and in August, through the acquisition of Weidu, the company entered the fast food business. In 2012, Longdehua Company realized operating income of 60 million yuan and nearly 50 service projects, with a total profit of 9 million yuan and a net profit of 7 million yuan. In the same period, Weizhidu Company had nearly 60 fast food stores in Shanghai, with an operating income of 55 million yuan and a net profit of 4.6 million yuan. The company plans that in the next three to five years, new business type's business income, including fast food and group meals, will reach about 80% of the company's total business income, which currently accounts for about 8.76%. It may be difficult to see the shift of the company's main business focus in the short term.
During the year, the company's sales expenses increased by 23.08% to 602 million yuan, accounting for 43.68% of the income. Secondly, due to the increase in the company's M & A projects and the increase in capital demand, the company issued "12 Hunan-Hubei bonds" of 480 million yuan, resulting in a sharp increase in financial expenses by 262.84% to 49.0916 million yuan. During 2012, the expense rate rose nearly 5 percentage points to 57.05%, leaving the company's net profit margin basically flat, still around 7.84%, with a slight increase in gross profit margin, with no significant improvement in profitability.
Chinese catering, the traditional main business of investment rating companies, is affected by the market, and its profitability may decline, so it is difficult to achieve large-scale profits in the short term. We estimate that the company's EPS from 2013 to 2015 will be 0.28,0.30,0.46 yuan respectively, downgraded to "prudent recommendation" rating.
Risks suggest that the recession has hit the catering industry; food safety risks; and the expansion of new stores is lower than expected.