Summary of the report:

With the development of extension, the scale of the company expands rapidly. The company started the extension development strategy in 2015, through four mergers and acquisitions, absorbing high-quality department store retail enterprises, the business scope rapidly spread to the whole country. The company has 36 physical stores and successfully transformed the national chain department stores. The company stores are integrated in an orderly manner, and the growth momentum is gradually released. As the recovery of the industry continues, the growth of the company's department store performance is certain.

Southwest region: transform the old store to regain its elegant demeanor, integrate the new store to open up the market. The upgrading of old stores goes smoothly, the new stores integrate and orderly layout, buy benevolence and spring, grasp the upgrading trend of middle and high-end consumption, and acquire Chongqing department stores to cover the core cities in southwest China.

South China: the injection of high-quality assets of the parent company will help the company's business development. The parent company is located in Shenzhen and Zhuhai. The market potential in South China is huge. Department Store / Ole has achieved same-store growth of 10.67% and 8.46% respectively in 17 years, and is expected to continue to grow in the future.

Northwest: absorb the Victoria Group and seize the market opportunity in Inner Mongolia. As a local retailer, Victoria has high brand awareness and market influence. Through absorption and successful development of the northwest market, the company has become the retail leader in Hohhot.

Technological empowerment, develop a new retail strategy to enhance the value of a single customer. The company is committed to creating a new retail strategy driven by technology and data, which empowers the experience and efficiency of department stores with a digital system. The combination of Youyi Shopping helps the company get through the new retail system, and the new technology is expected to continue to promote the transformation of department stores and improve the efficiency of the market.

Profit forecast and valuation:

In the context of the continued recovery of the department store industry over the past 18 years, we expect the flat efficiency of the company's department stores and shopping centers to maintain a growth rate of 2% and 8% in the next three years, while the general super format will maintain a growth rate of 1-8%.

It is estimated that the company's operating income for 18 to 20 years will grow by 10.16%, 5.53% and 4.31%, and net profit will grow by 12.67%, 7.37% and 4.49%, corresponding to EPS of 0.71 yuan, 0.76 yuan and 0.79 yuan, and PE of 7.32,6.81 and 6.52 times. Combining the absolute valuation method and the relative valuation method, we give the company a target price of 7.2 yuan and give a "recommended" rating for the first time.

Risk tips: industry recovery is not as expected, company store integration is not as expected, goodwill impairment risk