The company's 1H2018 revenue increased by 0.24% over the same period last year, and its net profit increased by 27.31% compared with the same period last year.

On August 25, the company announced its 2018 semi-annual report that 1H2018 realized operating income of 2.535 billion yuan, an increase of 0.24% over the same period last year, and realized a net profit of 75 million yuan, equivalent to a fully diluted EPS of 0.14 yuan, an increase of 27.31% over the same period last year. The net profit of non-parent was deducted by 70 million yuan, an increase of 19.91% over the same period last year, and the performance exceeded expectations. The main reasons for the large increase in 1H2018's parent net profit are: 1) the gross profit margin increased by 0.11% over the same period last year, and the expense rate decreased by 0.52% over the same period last year; 2) the non-operating expenditure was 299700 yuan, compared with 4.231 million yuan in the same period last year, mainly due to the closure of Qinghe store to pay lease termination compensation.

The comprehensive gross profit margin increased by 0.11 percentage points, and the expense rate decreased by 0.52 percentage points during the period.

1H2018's revenue from commodity sales was 2.414 billion yuan, an increase of 0.04% over the same period last year. 1H2018's consolidated gross profit margin was 19.99%, up 0.11% from a year earlier. The period expense rate of 1H2018 was 15.00%, a decrease of 0.52% compared with the same period last year, of which the sales / management / financial expense rate was 11.73% / 3.28% /-0.01% respectively, which decreased by 0.32% 0.12 / 0.08% compared with the same period last year. The sharp decline in the rate of financial expenses is mainly due to the increase in interest income from bank deposits and the reduction of credit card charges.

The main stores have the advantage of location and a high proportion of self-owned property.

The seven department stores under the company are basically located in the core business district or core community area of Beijing, with good location advantages. The company has its own property construction area of about 190000 square meters, and its own property accounts for 48%. The higher proportion of its own property makes the company have a better cost advantage and anti-risk ability. The company has high brand awareness and market influence in Beijing. In 2017, the company won the title of "Beijing Top Ten Commercial Brands Gold Award", and the brand influence continues to be consolidated.

Raise profit forecast and maintain "overweight" rating

After the company closed its loss-making stores, the cost declined obviously. We raised our forecast for the company's EPS from 2018 to 2020 to 0.33 / 0.36 / 0.39 yuan respectively (previously 0.30 / 0.33 / 0.36 yuan) and maintained the "overweight" rating.

Risk hint: the operating area is more concentrated, and the recovery of middle and high-end consumption does not meet expectations.