Events:
The company released its three-quarter report that the operating income in the first three quarters was 8.572 billion yuan, an increase of 0.58% over the same period last year. The net profit attributed to the owner of the parent company was 741 million yuan, up 28.22% over the same period last year. Basic earnings per share was 0.4277 yuan, an increase of 28.25% over the same period last year.
Main points:
1. Adjustment of business strategy and slowing down of revenue growth
From January to September, the company's operating income increased by 0.58% compared with the same period last year, of which Q3 realized revenue of 2.506 billion yuan, down 1.58% from the same period last year; net profit increased by 28.22%, of which Q3 net profit was 213 million yuan, up 7.75% from the same period last year. In terms of business formats, revenue from department stores fell by 0.31%, general super by 17.74%, and Ole increased by 1.2% compared with the same period last year. The company adjusts its business thinking, shrinks its business in Chengdu and closes three inefficient stores in Chengdu. The increase in net profit comes from the improvement of the company's business model. Under the adjustment of the mode of joint venture to lease, the operating efficiency of the company has been further improved. Gross profit margins of department stores in Baotou and Hohhot further increased 3.93pct and 0.62pct to 23.93% and 19.55%.
2. improve the quality of business efficiency, properly control fees and push up the level of net profit
With the improvement of operating efficiency, the gross profit margin of the company increased by 1.65pct to 29.75, of which Q3 gross profit margin increased by 0.84pct to 31.32%. Chain scale, cost control is proper, sales expense rate is reduced to 10.56% 0.67pct; financial expense rate is reduced to 2.79% 0.39pct.
Store expansion, during the reporting period, the company issued a pre-Victoria year-end bonus to increase the management expense rate of Q3 by 0.5pct to 2.64%, and to increase the management expense rate from January to September by 0.22pct to 2.37%. Combined with the above, the company's net interest rate increased steadily, and the net interest rate from January to September increased by 2.05pct to 9.34% compared with the same period last year.
3. The consumption capacity of high-line cities has declined, which is a drag on the regional revenue performance. Residents' consumption continues to be under pressure, and the monetization of shed changes continues to weaken the consumption power of high-line cities. The company's revenue in Nanchong and Heze areas fell by 7.53% and 0.67% compared with the same period last year. Revenue growth in Hohhot and Baotou in the northwest region fell by 3.32% and 6.7% respectively. Consumption capacity in high-line areas continues to be under pressure, dragging down the company's overall performance.
Conclusion:
We predict that the company's EPS (earnings per share) for 2018-20 is 0.68,0.74 and 0.77 yuan respectively, and the PE corresponding to the current closing price is 7.27,6.74 and 6.43 times, respectively. Considering that the company's stores in Chengdu and Chongqing support the performance, maintain the "recommendation" rating.
Risk hints: the consumption of residents in third-and fourth-tier cities continues to be under pressure, the performance of the northwest region is lower than expected, and the integration of company stores is not as expected.