Event
The company publishes its 2017 annual report. In 2017, the company achieved operating income of 430 million yuan, an increase of 11.61% over the same period last year, a net profit of 91.5671 million yuan, an increase of 25.86% over the same period last year, and a non-return net profit of 84.5476 million yuan, an increase of 17.59% over the same period last year.
2017Q4 achieved an operating income of 146 million yuan in a single quarter, an increase of 16.52% over the same period last year, and a net profit of 36.5005 million yuan, an increase of 54.03% over the same period last year.
Brief comment
1. Channel optimization, product upgrading, driving the company's sustained growth in performance the company has been involved in the maternal and infant industry for 30 years, and has three independent brands: the rabbi of medium-and high-end brands, the next generation of mid-range brands and Baby rabbi for infant and child care products, focusing on maternal and infant consumer goods for infants and young children.
By category, the income contributed by cotton products for infants and young children was 227 million yuan, accounting for 52.97%, an increase of 14.34% over the same period last year, and the gross profit margin increased by 2.34pct to 49.85% over the same period last year.
The income of infant clothing reached 118 million, accounting for 27.44%, down 1.01% from the same period last year. Thanks to strengthening the control of procurement and outsourcing processing costs, the gross profit margin increased to 64.07% from the same period last year. The income from other daily necessities for infants and young children was 84.2841 million yuan, accounting for 19.59%, an increase of 14.34% over the same period last year, and the gross profit margin increased by 3.77pct to 47.39%.
In 2017, the company's gross profit margin increased by 2.35pct to 53.27% year-on-year, and net profit margin increased by 2.41pct to 21.29% year-on-year. The sales expense rate, management expense rate and financial expense rate were 18.82% (+ 0.24pct), 10.75% (+ 1.85pct) and-1.09% (+ 1.05pct), respectively. The larger increase in management fees is mainly due to the company's increase in equity incentive fees of 3.9325 million yuan and J3 fund management fees of 5.8301 million yuan. The increase in financial expenses is mainly due to the use of bank deposits to purchase wealth management products and the reduction of interest on bank deposits.
By the end of 2017, the company's asset-liability ratio was less than 12%. In 2017, the company's inventory amount was 183 million yuan, an increase of 1.88 percent over the same period last year; inventory turnover days were 294 days, an increase of 28 days over the same period last year; accounts receivable were 54.3549 million yuan, a slight increase of 0.80 percent over the same period last year; and accounts receivable turnover days were 40 days, an increase of 4 days over the same period last year. With the further upgrading and optimization of the terminal channel, the operating efficiency is expected to be further improved.
2. Actively explore the omni-channel mode of layout, original design and development of diversified new product companies basically form the omni-channel marketing mode of "self-management + joining + e-commerce + WeChat business", and the channel benefit drives the terminal sales. The company adjusts the structure of offline stores and gives priority to local shopping center channels. At the end of the reporting period, there are nearly 100 brand image stores in shopping centers across the country. The company strengthened the fine management of shops, opened 278 new stores in 2017, closed 151stores with low operating efficiency, and had a total of 1400 terminal image stores at the end of the period, including 1232 franchise stores and 162self-owned stores. At the same time, the company's e-commerce and WeChat business channel sales maintained more than 50% growth.
The most fundamental way for enterprises to develop new products is to rely on their own design and development. General Manager Lin Ruowen, one of the founders, is also the chief designer, sets up product R & D departments in rabbi, next generation, Baby rabbi and other brand centers, and cooperates with domestic well-known universities, and fashion designers such as Europe, Japan and South Korea maintain close interaction to create an efficient design R & D platform. In 2017, the number of R & D personnel increased by 22.54% to 125 compared with the same period last year, and R & D expenses increased by 19.15% to 14.1294 million yuan over the same period last year. More than 2000 new products were added each year, and 4 utility model patents, 4 invention patents and 10 copyrights were obtained.
3. Issue convertible bonds and equity incentives to continuously consolidate the domestic infant brand status. The company adheres to the development strategy of two-wheel drive of infant clothing, cotton products and infant daily necessities. In December 2017, the company plans to issue 329 million yuan of convertible bonds to invest in the construction of intelligent production and supply chain management of maternal and child care products, intelligent production of baby underwear and supply chain management. The company obtains 24721.5 square meters (about 37 mu) of state-owned land use right located in Jinping District of Shantou City through auction and auction, which is used as intelligent manufacturing and supply chain project land. 1) raise 184 million yuan to invest in the project of washing and care products for women and children, the sales of the company's washing and care products account for about 6%, and there is much room for improvement in the future. 2) raise 145 million yuan to invest in the intelligent baby underwear project, integrate information, automation and digital means to realize the intelligent control of a series of processes from design, typesetting, tailoring to sewing and back processing, and further consolidate the dominant position of the company's infant clothing and cotton business in the industry.
In July 2017, the company issued a 2017 restricted stock incentive plan to grant 2 million restricted shares, accounting for 0.99% of the company's share capital, to encourage 27 directors, senior managers and core backbones at a price of 12.35 yuan per share. the performance appraisal target is that the growth rate of operating income in 2017-2019 is not less than 10%, 25% and 35% respectively. The growth rate of performance in 2017 was 25.86%, exceeding the assessment target.
4. speed up the layout of the maternal and infant industrial chain and share the second-child policy and consumption upgrading dividend in 2017, the company has further expanded its products and services around the maternal and infant industry to create a mother-to-child ecosystem that draws and promotes each other. In terms of mother and baby food, the company holds a 20% stake in Mille Dairy Company with its own capital of 50 million yuan through a wholly-owned subsidiary rabbi investment, and then indirectly holds a 16% stake in the Danish milk powder factory. In terms of the child care industry, the rabbi invested in May to set up a rabbi culture and education consulting company with its own capital of 4 million yuan, with the purpose of "laying a good foundation for a happy life" to provide child care services for children aged 18 months to 3 years old. In terms of maternal and infant health, rabbi investment and partners jointly initiated the establishment of Guangdong Jiakang Medical Investment Center, with a subscription of 32.3 million yuan, accounting for 60.95% of the total investment. The rabbi invested 2 million yuan in Beijing Yueji Times Technology Co., Ltd. in July, with a stake of 2%, in order to expand the popularity of the brand in the post-80s and post-90s. In December, we signed an agreement with Japanese high-quality mother and baby brand Pigeon to use the company's offline channels to act as agents for Bei's products.
Investment suggestion: the omni-directional layout of the company's baby industry chain, the first to benefit from the high growth of the baby industry after the opening of the second-child policy, with scarcity.
The main business is solid and steady, with brand advantages and technical advantages. The investment platform has been successfully set up to assist in the extension of high-quality business related to infants and children in the future, and actively achieve the strategic goal of the comprehensive ecological circle of mother and child industry covering six major areas, including "food, clothing, use, play, culture and education, and medical and health care". We expect the net profit for 2018-2019 to be 1.11 and 137 million respectively, an increase of 21.4% and 24.2% respectively over the same period last year, EPS is 0.54,0.68, corresponding to PE is 28 and 23 times, maintaining the "overweight" rating.
Risk factors: the rapid development of the baby industry leads to intensified competition in the future; the effect of the second-child policy is not as expected; offline e-commerce diversion risk.