From January to September, income decreased by 1%, non-net profit increased by 14%, and net profit decreased by 14%.
From January to September 2017, the company achieved an income of 446 million yuan, down 0.92%, deducting non-net profit of 6.8725 million yuan, an increase of 13.73%, a net profit of 8.3639 million yuan, and a decrease of 14.35% EPS0.07 yuan. The growth rate of deducting non-net profit was higher than that of income, benefiting from the increase in gross profit margin, while the higher growth rate of net profit was mainly due to a 59.94% reduction in non-recurrent profit and loss due to the decline in government subsidies and financial income compared with the same period last year.
From a quarterly point of view, the company's net profit fluctuated greatly in 2017. 16Q1-17Q3 income growth rate was + 0.73%, + 29.71%, + 9.82%, + 12.14%, + 2.39%, + 2.39%,-6.89%, and net profit growth rate was + 8.36%,-3.36%,-101.57%,-40.38%,-48.89%, + 66.65%, + 1261.44%. In the first half of 17, e-commerce revenue growth led to a slight increase in income, Q1 management expenses increased 1.77PCT led to a decline in net profit, Q2 gross profit margin increased 2.04PCT led to a return to net profit growth; the decline in 17Q3 group-buying income led to a decline in income growth, and an increase in gross profit margin 3.65PCT contributed to a substantial increase in net profit.
The weakening of sales promotion led to an increase in gross profit margin, an increase in cost rate, and a slight decline in inventory turnover.
Gross profit margin: the company's gross profit margin increased by 1.90PCT to 38.52% from January to September 2017, mainly due to the weakening of the company's sales promotion efforts. 16Q1-17Q3 gross profit margin is 39.53% (- 3.59PCT), 36.73% (- 5.42PCT), 33.99% (- 6.93PCT), 39.77% (- 0.96PCT), 39.16% (- 0.37PCT), 38.77% (+ 2.04PCT), 37.64% (+ 3.65PCT). 17Q3 reduced its promotion efforts, and the proportion of group buying business income with low gross margin decreased, driving the overall gross profit margin back up.
Expense rate: during the period from January to September in 17 years, the expense rate increased by 1.96PCT to 35.22%, of which the sales expense rate increased by 0.70PCT to 21.84%; the management expense rate increased by 0.79PCT to 12.86%, which was mainly affected by the increase in operating costs and vertical e-commerce input after the completion of Changsha Industrial Park; the financial expense rate also increased by 0.46PCT to 0.52%, mainly due to the increase in interest expenses.
Other financial indicators: 1) inventory at the end of September 2017 increased by 9.37% to 318 million yuan compared with the beginning of the year, mainly due to the increase in preparation for the Singles' Day shopping festival and e-commerce stock preparation. The inventory turnover ratio was 1.11,0.17, and the inventory-to-income ratio was 0.58. in the same period last year, inventory turnover decreased slightly. 2) accounts receivable increased 25.30% to 44.865 million yuan compared with the beginning of the year, mainly because the company gave more account period and credit line support to franchisees with good credit.
3) the investment income from January to September also decreased by 33.95% to 2.1252 million yuan, mainly due to the decrease in financial management income.
4) the net operating cash flow increased by 54.71% to-29.7059 million yuan, mainly due to a 12.64% drop in cash paid for goods and services to 357 million yuan.
Pay attention to the performance of Q4 e-commerce during the peak season, and the deadline of the IPO fundraising marketing network expansion project is extended.
The price of traditional home textile products is relatively high. In recent years, online home textile products have been recognized by consumers with the advantage of high performance-to-price ratio, and their income has achieved rapid growth. 2017H1 Tmall GMV has increased by about 49% compared with the same period last year, and home textile is expected to grow even higher. Luolai, Mengjie and other brands maintain rapid growth. The company's e-commerce business also continues to grow. In 2017, Tmall's double 11 pre-sale list ranked fourth in the home textile category, and Q4 is the peak season for e-commerce, which is expected to boost the company's online revenue.
After the company goes public in June 2015, it plans to use 80.679 million yuan to expand its marketing network and set up 152 marketing outlets. On August 23, 2017, the company announced that due to the rapid development of e-commerce in recent years, the company adopted a more prudent store opening strategy. The progress of the marketing network expansion project in the IPO fundraising project was lower than expected, and the uncompleted progress was 53.67% by the end of June 2017. The company will extend the construction period from June 2017 to June 2019. In the future, with the warming of physical stores, the company will gradually resume the progress of opening stores according to the changes of the retail environment in various cities.
Net profit is expected to increase by-20% to 10% in 2017, ending vertical e-commerce investment and cooperation with Ketong Core City.
The company expects to achieve a net profit of 17,1863 to 23.6312 million yuan in 2017, an increase of-20% to 10% over the same period last year. The company's home textile business has maintained a stable development, but the initial operation cost of Changsha Industrial Park has increased a lot.
We believe that: 1) the company locates the market with high performance-to-price ratio, and the net opening of offline stores will be restored according to the retail environment in the future, and the increase in the number of shopping malls is expected to promote the same store. The "Singles Day" shopping festival catalyses, and the rapid expansion of e-commerce revenue contributes to income growth. 2) the company's increased promotion efforts in 2016 led to a decline in gross profit margin. After 2017, the company reduced its promotion efforts, and the proportion of group buying business with low gross margin remained stable, and gross profit margin is expected to continue to rise. At present, the production base of Changsha Industrial Park has been put into operation, and the management cost will be increased in the short term. 3) 2016H1 has launched HBDIY, an Internet vertical e-commerce platform for personalized young consumers, but due to the high cost of operation and marketing, the sellers' acceptance is lower than expected, and vertical e-commerce investment will be terminated in the future; home textile IP derivatives operation business is still in progress. 2017.5.6 company announcement and Ketong Core City signed a cooperation agreement, intended to use the incubation platform of hard egg technology to jointly create smart home "AI+ home textile" ecology, but the two sides did not make substantial progress in cooperation, did not carry out specific business, and Ketong Core City investment institutions issued a short report, 2017.25 company announcement terminated cooperation with hard Egg Technology, Ketong Core City Group.
Taking into account that the gross profit margin rose more than expected, the 2017-19 EPS was adjusted to 0.16 scarp 0.19 Unix 0.25 yuan, with a higher valuation and a "neutral" rating.
Risk tips: the number of channels is reduced, e-commerce growth is not as expected, and so on.