Main points of investment:
In 2017, the company achieved operating income of 9 billion yuan, an increase of 5.24% over the same period last year, a net profit of 499 million yuan, a decrease of 6.29%, a gross profit margin of 62.54%, a decrease of 1.54pct, a net interest rate of 5.54%, and a slight decrease in 0.68pct. The income in the fourth quarter alone was 2.77 billion yuan, a slight increase of 0.04% over the same period last year. The net profit returned to the mother was 159 million yuan, down 23.24% from the same period last year, the gross profit margin was 56.99%, the net profit rate was 5.74%, and the 1.74pct was lower than the same period last year.
The brand portfolio is diversified, and the menswear brand is growing rapidly. In 2017, the company's leading brands La Chapelle and Puella achieved revenue of 2.23 billion yuan and 1.83 billion yuan respectively, down 1% and 10% from the same period last year. The combined revenue of the two brands accounts for 45%, which is still the main source of the company's operating income. At the end of the year, La Chapelle opened 120 net stores, 1975 stores at the end of the year, 26 Puella stores and 2116 stores at the end of the year.
In addition, the company's three other women's clothing brands, 7 Modifier, La Babit é and Candie's, which were cultivated independently in the early days, achieved revenue of 14.89 billion yuan in 2017, up 13.4%, 28.0% and-2.3% year-on-year. Menswear brand JACK WALK/Pote achieved business income of 491 million yuan, an increase of 17.4% over the same period last year. By the end of 2017, the company's 12 brands had a total of 9448 stores, including 4091 for the two leading brands, 1716 for 7 Modifier and 1562 for La Babit é, and 2079 for the other 8 brands.
In 2017, the company's overall gross profit margin was 62.54%, a decrease of 1.54pct compared with the same period last year, mainly due to lower terminal discounts and transaction prices of clothing products, and the gross profit margin of high unit price top products decreased most significantly, falling 2.38pct to 61.62% compared with the same period last year. The total three rates for the whole year increased slightly by 0.99pct compared with 2016, the expense situation remained stable, and operating profit increased by 7.35% compared with the same period last year. Due to the reduction of government subsidies, non-operating income decreased significantly (from 82.38 million yuan to 4.01 million yuan), while non-operating expenses increased significantly (from 640000 yuan to 11.27 million yuan), mainly due to an increase in foreign donations, resulting in a 6.29% year-on-year decline in net profit.
The company's offline revenue increased by 0.12% compared with the same period last year, accounting for 85.1% of the total revenue, while e-commerce business revenue increased by 45%, accounting for 14.9%. Among the offline revenue, due to channel transformation and adjustment, the number of counter stores decreased from 5730 at the end of 2016 to 5707, a net decrease of 23; and the decline of old stores led to a year-on-year decline in revenue of 11.13%, accounting for 43.3% of the company's revenue from 51.3%. And due to the decrease in the number of department store counters and the decline in same-store revenue, the overall counter income decreases, which reduces the brand profitability of department stores and affects the overall corporate profitability.
Profit forecast and valuation. We expect the company to achieve a net profit of 515 million yuan in 2018-2019. The EPS reaches 0.94 and 0.99 yuan. We give the company 2018 18XPE, corresponding to the target price of 16.92 yuan, given the "overweight" rating.
Risk hint. Weak consumer terminal demand, excessive inventory balance and falling price risk.