1~3Q18 performance exceeded expectations
Hualian Comprehensive Super announced its results for the first three quarters of 2018: operating income was 9.241 billion yuan, up 0.7% from the same period last year; its net profit was 68.81 million yuan, down 4.4% from the same period last year, exceeding previous expectations, benefiting from the pick-up of the main supermarket business and improved rates. From a quarterly point of view, Q3/Q2/Q1 revenue is + 10.2% respectively compared with the same period last year. The net profit is + 857.2%, 82.8% and 853.4% respectively.
Trend of development
1. Revenue growth has picked up somewhat, and exhibition stores are expected to speed up. The company's revenue in the first three quarters was + 0.7% year-on-year, a pick-up from the semi-annual report. From a regional point of view, the revenue of the life supermarket in East China / Central China / Southwest / Northeast China in the first three quarters was + 20.9%, 19.4%, 10.6%, 9.7% respectively compared with the same period last year. In terms of exhibition stores, on the basis of five new life supermarkets and one store closure in the first half of the year, the fourth quarter plans to open stores in the northwest / southwest / northeast region on 4-1-1. The acceleration of exhibition stores is expected to contribute to revenue growth.
2. Profitability is basically the same. The gross profit margin of the company's main business in the first three quarters was 21.3%, basically the same as the same period last year, and slightly lower than the semi-annual report by 0.2ppt. During the period, the expense rate decreased from 0.9ppt to 20.7% compared with the same period last year, mainly because the sales expense rate decreased to 17.3% from the same period last year, and the management expense rate was basically the same as the financial expense rate. The final net profit margin is 0.7%, which is basically the same as the same period last year and month-on-month.
3. The simultaneous development of endogenesis and extension is expected to enhance the comprehensive competitiveness. In the face of fierce competition in the industry, the company has both endogenesis and extension, which promotes the expansion of new stores, optimizes commodity structure, and strengthens cost management; in extension, efforts are made to enrich community retail business. it is recently announced that it plans to buy 100% equity of Beijing Baihaoji Community Department Store for 208 million yuan, which is expected to thicken the company's performance and enhance the overall market share.
Profit forecast
Based on the pick-up trend of the company's performance, we raised our 2018 Universe 19e profit forecast by 7.9% Universe 7.7% to 0.09 Universe 0.08 yuan.
Valuation and suggestion
The company's current share price corresponds to 18max, 1919, 38ax, 40x Pmax E. Maintain a neutral rating and raise the target price by 5% to 3.9 yuan based on earnings forecast adjustments, corresponding to 44 times Pamp E in 19 years, with 15% room for the current share price.
Risk
Consumption continues to be weak; industry competition intensifies.