18H1 income fell by 12%, net profit increased by 6%, and exchange rate depreciation promoted Q2 net profit to increase greatly.
In the first half of 2018, the company achieved an income of 217 million yuan, down 11.86%, and the net profit returned to its mother was 11.7953 million yuan, an increase of 5.96%, and a deduction of 9.0894 million yuan for non-net profit, an increase of 22.90%. The profit growth rate higher than income is mainly due to the decrease in the rate of financial expenses and the increase in investment income, which is lower than the deduction of non-net profit, which is mainly due to the decrease in profit and loss on the disposal of non-current assets, which leads to a decrease in non-recurrent profit and loss by 27.57%.
From quarter to quarter, 2017Q1-18Q2's revenue increased by 12.96%, 26.18%, 59.92%, 7.58%,-13.75% and-9.90%, while its mother net profit increased by 13.39%, 168.33%, from profit to profit, from profit to loss,-71.39% and 332.58%. 17Q4 made provision for the impairment loss of Youshe's technology assets, which led to a sharp decline in net profit and a loss in its annual performance. 18Q1-Q2 domestic and foreign fur consumption is relatively weak, company income declined compared with the same period last year, 18Q1 gross profit decline, management and financial expense rate increase led to net profit decline compared with the same period last year, 18Q2 RMB exchange rate depreciation, financial expense rate dropped significantly to promote net profit growth.
Weak fur consumption and declining rental income at home and abroad have led to a decline in income.
According to the business model, 2018H1's OBM, ODM, OEM and other businesses achieved revenue of 9117.01 yuan, 5049.91 yuan, 905.50 yuan and 66.1562 million yuan respectively, an increase of-18.80%,-0.13%,-29.93% and-5.88% respectively. Weak demand for fur clothing affected the company's revenue, and rental income from merchants such as Wass Fur City, fur trading market and industrial park declined, resulting in a year-on-year decline in other businesses.
From a regional point of view, 2018H1's export sales, domestic sales and other businesses achieved income of 5628.05 yuan, 9444.37 yuan and 66.1562 million yuan respectively, an increase of-9.11%,-17.11% and-5.88%, respectively. The downturn in demand led to a large decline in domestic income.
Other operations lead to a decline in gross profit margin, and exchange rate depreciation promotes a decline in the rate of financial expenses.
2018H1's gross profit margin also fell by 3.66PCT to 29.29%, mainly due to the company's preferential policies for booth rental and sales in Wass Fur City and fur trading market, which led to a significant decline in other business gross profit margins. The gross profit margins of OBM, ODM, OEM and other businesses are 33.43% (- 2.38PCT), 22.03% (+ 4.69PCT), 15.22% (+ 0.26PCT) and 31.06% (- 11.85PCT), respectively. The gross profit margin of 17Q1-18Q2 is 38.33% (- 7.41PCT), 27.39% (+ 3.57PCT), 15.02% (- 12.63PCT), 24.49% (+ 3.05PCT), 33.05% (- 5.28PCT), 25.57% (- 1.82PCT).
During the 2018H1 period, the expense rate decreased from 2.02PCT to 24.75%, and the sales expense rate also increased to 10.54%, mainly due to the increase in depreciation and other expenses. The management expense rate also increased to 13.13%, mainly due to the year-on-year increase in staff salaries and R & D expenditure, and the financial expense rate dropped to 4.21PCT to 1.08%. It was mainly due to the continued depreciation of the RMB exchange rate against the US dollar after April 18, by 5.55% by the end of June, resulting in an increase in exchange earnings compared with the same period last year, and the 18Q2 financial expense rate also decreased by 13.85PCT.
The operating pressure remains, and the net profit is expected to increase by-30% and 20% from January to September in 18 years.
The company expects to achieve a net profit of 1139.43 million yuan from January to September 2018, with an increase of-30% and 20%, mainly due to the stable development of the main industry and increased investment in the construction of Wass Fur Town.
We believe that: 1) the company is the leader of the domestic fur clothing industry, affected by the depressed consumption of fur clothing at home and abroad, the transformation of social e-commerce is not as expected, the income growth rate has declined, and the overall operating pressure is still large. It is expected that the company will expand its domestic customers in the future, and the income from Wass Fur City rental and house buyout is expected to increase, driving the overall income to stabilize. 2) the gross profit margin of other businesses such as 18H1 leasing has declined, which is expected to affect the performance of gross profit margin for the whole year, and it is expected to recover after the increase of merchant occupancy rate in the future. 17 years of social e-commerce platform Youshe technology performance is not up to expectations, the provision for asset impairment led to a sharp decline in profits, 18 years later, profitability will recover. 3) at present, the construction of Xiongan New area is progressing steadily. The company is located in Suning County, Hebei Province, less than 100 kilometers away from Xiongan New area. Wass Fur City and Fur Trading Center undertake part of the industrial transfer and increase other business income. 4) on July 2, 2018, the company announced that the company signed the entrusting operation and management framework agreement with Hongxing Metro. The company intends to invest in the construction of large-scale household shopping malls and supporting facilities in Suning Economic Development Zone, Cangzhou, Hebei Province, which will be managed by Hongxing Macailong. After completion, the company will collect rent and management fees from resident merchants as income. 5) the export income of 18H1 Company accounts for 25.94%, and the devaluation of RMB constitutes a positive.
As the company's revenue and gross profit margin fell more than expected, we downgraded our EPS forecast for 2018-20 to 0.05cm 0.07max 0.11 yuan. The current share price corresponds to a 17-year PE of 122 times, with a high valuation and a "neutral" rating.
Risk tips: weak overseas demand, depressed domestic consumer market, RMB exchange rate fluctuations and so on.