2018Q1~3 performance meets expectations

Haiyin shares announced results for the first three quarters of 2018: operating income was 1.876 billion yuan, up 22.8% from the same period last year; net profit belonging to the parent company was 131 million yuan, up 12.6% from the same period last year (deducting non-net profit up 12.75% from the same period last year), in line with expectations. On a quarterly basis, Q1/Q2/Q3 revenue and net profit are + 28.0%, 31.0%, 11.5% and 15.0%, respectively, compared with the same period last year.

Trend of development

1. Q3 revenue growth has slowed down compared with Q2. The company's revenue in the first three quarters was + 22.8% compared with the same period last year. Among them, revenue in the third quarter was + 11.5% compared with the same period last year, and the growth rate was slower than that of Q2. We expect the department store format to remain under pressure due to the slowdown in overall consumption growth and intensified competition in the industry, and the commercial and real estate sectors are expected to continue to grow.

2. The change of income structure leads to the increase of gross profit margin. In the first three quarters, the comprehensive gross profit margin reached 40.3%, an increase in 3.7ppt compared with the same period last year, which is expected to be related to the increase in the proportion of income in high-margin industries such as real estate. During the period, the expense rate increased 0.1ppt compared with the same period last year, in which the sales / management / financial expense rate was-1.5/-0.5/+2ppt, respectively. The rapid increase in financial expenses was mainly due to the increase in interest caused by the increase in the issuance of corporate bonds. In addition, the company carried forward the cost of government repurchase of construction land, resulting in a substantial increase in non-operating expenses. The final net profit margin fell 0.6ppt to 7.0 per cent year-on-year.

3. Multi-format layout is expected to contribute to the steady growth of performance. At this stage, the company continues to focus on multi-format layout, the financial sector continues to optimize and upgrade financial services products, expand the coverage area, and is expected to achieve steady growth; the commercial sector gradually promotes the transformation and upgrading of existing formats, creating an experiential consumption scene, and through the management output and other light asset model to drive revenue growth; the real estate sector continues to promote project investment and sales, multi-wheel drive is expected to help the company's steady growth.

Profit forecast

We keep the 2018Universe 19e profit forecast of 0.11Compare 0.12 yuan unchanged.

Valuation and suggestion

The company's current share price corresponds to 18max, 1923, 19X, 20x Pmax E. Maintain the recommended rating, with a target price of 3.6 yuan, corresponding to 18Universe 1933 Placement E, which has 44% room compared to the current share price.

Risk

Competition in the industry intensifies; consumption remains depressed.