occurrences
The company released the 2017 semi-annual report
In the first half of 2017, the company achieved operating income of 39,4516,600 yuan, an increase of 5.6% over the previous year; realized net profit of 26.269,500 yuan, an increase of 23.9% over the previous year; and realized net profit of 26.938 million yuan after deducting non-return mother's net profit, an increase of 36.79% over the previous year.
Brief review
The company's operation is steady, moderate and positive, and its performance is growing steadily
In the first half of 2017, the company achieved operating income of 394,51666 million yuan, an increase of 5.6% over the previous year; achieved net profit of 26.2695 million yuan, an increase of 23.9% over the previous year; in the second quarter alone, the company achieved operating income of 17,9722 million yuan, an increase of 0.35% over the previous year; and realized Guimu's net profit of 10.913,600 yuan, an increase of 9.28% over the previous year. The reason for the month-on-month decline in revenue in the second quarter was due to the influence of the holidays in the first quarter. Revenue was 21,47946 million yuan. The revenue base was large, and revenue returned to normal levels in the second quarter. Overall, revenue growth in the first half of the year was mainly due to the expansion of sales channels and increased promotion efforts. Looking at the main business, the sales revenue of low-end products, which accounted for 74.14% of total revenue, increased 6.32% year on year, and the contribution rate was the main source of revenue; in terms of channels, the sales revenue of the company's main channel dealers increased 10.69% year on year. At the same time, by the end of the reporting period, the company had 460 dealers, a decrease of 27 dealers compared to the end of 2016; looking at sales regions, the sales revenue of Zhejiang East Sales Area, Southern Sales Area, and Zhejiang West Sales Area grew the fastest, at 8.11%, 10.9%, 15.47%, respectively.
Costs increase and expenses decrease, gross margin and net profit margin drop by one rise
In the first half of 2017, the company's gross profit margin and net interest rate were 55.47% and 6.66% respectively. Gross margin fell 2.16 percent year over year, and net interest rate increased 0.99 percent year over year. We believe that the decline in the company's gross margin is mainly due to the expansion of sales channels and increased promotion efforts. The company's revenue increased 5.6% in the first half of the year, but operating costs increased 12.18% year-on-year due to increased operating income and processing of some promotional fees through invoice discounts. At the same time, the company's low-end product sales base is large, which is the main driving force behind the increase in the company's performance, which has dragged down the company's overall gross margin performance. The reason for the year-on-year increase in net interest rate was due to a simultaneous decrease in the three fees. Among them, sales expenses decreased by 5.33% compared to the same period of the previous year, mainly advertising expenses increased by 5069,300 yuan, up 99.18% from the same period last year. Promotion fees, employee remuneration, transportation and vehicle expenses decreased by 4.121 million, 3.422 million, and 1,9193 million respectively; management expenses decreased 3.44% from the same period last year, mainly due to a decrease in listing fees and the impact of various taxes and fees; financial expenses decreased 7.04% from the same period of the previous year, mainly due to actual loans. Interest expenses fell 16.23% year-on-year due to lower interest expenses due to lower interest rates.
Lay out high-end markets and increase market share
The company has a complete industrial chain for winemaking grape sapling selection, ecological fertilizer production, wine-growing, wine production, product quality inspection, packaging and printing, logistics and distribution, and sales. At the same time, it has established a marketing network combining “dealer models with direct sales models such as supermarkets, e-commerce, group purchases, etc.” which basically covers the whole country, laying the foundation for long-term development. In terms of products, on the basis of an existing 20,000 mu organic wine-growing base, the IPO raised funds to build a new 18,000-acre planting base to guarantee the supply of high-quality organic grape raw materials. At the same time, the company plans to use the world's leading brewing process and modern winemaking equipment to build a 60,000-ton high-quality original wine production base in Mildura, Victoria, Australia, further expanding the company's high-quality wine production scale, meeting the current demand for China's consumption upgrade and consumers' demand for high-quality wine to enhance the company's core competitiveness. In terms of marketing, marketing work is carried out around the policy of “flattening channels, refinement of group purchases, maximization of execution, and vertical organization”, unswervingly implementing the boss project package promotion model, simultaneously carrying out Dragon Network projects, cultivating a loyal core consumer group, and increasing market share.
Excellent dealers hold shares and consolidate sales channels
The company has now established a marketing network mainly based on the dealer model and basically covering the whole country. The company introduced excellent dealers through the non-public offering of shares, so that dealers became indirect shareholders of Weilong Co., Ltd. and bound the long-term interests of both parties together, thus further consolidating the long-term stable cooperative relationship between the company and dealers. Currently, Weilong Wine's main sales market is in East China. Through cooperation with excellent dealers, while strengthening market sales in East China such as Zhejiang and Jiangsu, it is continuously developing other regions such as Sichuan, Henan, Hunan, Chongqing, etc., solving the problem of distributors' sales regions being too concentrated, and further strengthening the nationwide coverage of the marketing network, thereby further increasing market share.
Profit forecasting and valuation
The steady increase in performance in the first half of 2017 and the reduction in sales expenses, management expenses, and financial expenses led to a sharp increase in net profit. Judging from the 2016 performance, the company's design capacity is 40,000 kiloliters, the actual production capacity is only 24553.06 kiloliters, the capacity utilization rate is 61.38%, and there is plenty of room for product production to increase. At the same time, the company has established long-term stable cooperative relationships with dealers. With the further expansion and upgrading of the domestic wine market, product sales are expected to increase further, supporting the company's performance growth. We expect the company's EPS in 2017-2019 to be 0.37, 0.48, and 0.64 yuan/share, respectively.