Net profit in the first half increased by 10.8% over the same period last year, in line with expectations.
Haiyin shares announced its results for the first half of 2018: operating income 1.24 billion yuan, an increase of 29.5% over the same period last year; net profit belonging to the parent company was 72.71 million yuan, an increase of 10.8% over the same period last year, corresponding to 0.03 yuan per share, which is in line with our expectations. From a quarterly point of view, Q1/Q2 revenue and net profit are + 28%, 31% and 23%, respectively.
Trend of development
1. Commercial business grew steadily, and real estate sales increased greatly compared with the same period last year. From a sub-sector point of view, the company's revenue in the commercial / department store / real estate sector in the first half of the year was + 12.4%, respectively. The revenue of Maoming Haiyue, Zhaoqing Dawang and Zhuhai Aojie real estate projects was smooth, which was the main reason for the income growth of the real estate sector. The financial services business also maintained a smooth operation, with Hengyu small loan achieving an 11% increase in revenue. The newly added Internet small loan / factoring business in the second half of 2017 contributed 14.35 million yuan / 9.82 million yuan in incremental income respectively.
2. The rate of cost and expense is improved, and the increase of prepaid income tax is a drag on the profit margin of the current period. The company's gross profit margin increased by 3.9ppt to 38.8% in the first half compared with the same period last year, mainly due to higher gross profit margin of real estate sales and a substantial increase in sales revenue; during the period, the expense rate decreased by 1.1ppt to 23.9%, of which the sales expense / management expense rate decreased by 1.6/0.7ppt. The increase in prepaid income tax on sales in the real estate sector led to a 99% increase in income tax expenses in the first half of the year, which dragged down the profit margin of the current period by 1ppt to 5.9%. In the future, if temporary differences are eliminated, the profit side will grow faster.
3. The diversification of business and financial business develops steadily. In terms of ① commercial business, the company is actively promoting the innovation and upgrading of business formats, creating experiential consumption scenes, represented by the new retail project of Haiyin small stack, and speeding up the remote expansion of "Haiyin another city". The Shanghai project has entered the stage of preparation for pre-sale declaration, and the overall performance will be improved after the project is landed. ② financial business, the company to Haiyin Financial Control as a platform, the launch of factoring, Internet small loans, financial leasing and other diversified financial services, is expected to achieve steady growth.
Profit forecast
We keep our earnings per share forecast for 2018 Universe 19 unchanged.
Valuation and suggestion
The company's current share price corresponds to 2018, 1924, respectively, 21 times the price of Pax E. We maintain our recommended rating and target price of 3.60 yuan, which corresponds to 29 times Pamp E in 2019, which is 37.9% upside from the current share price.
Risk
Consumption is in the doldrums; competition in the industry has intensified.