Events:
According to the company's three-quarter report, operating income in the first three quarters was 3.142 billion yuan, an increase of 9.71% over the same period last year; net profit attributable to the owner of the parent company was 79.9413 million yuan, down 15.78% from the same period last year; and basic earnings per share was 0.1877 yuan, down 18.78% from the same period last year.
Main points:
1. Small format stores continue to expand, and the revenue of the main business is steady and good.
The company added 10 small-scale stores in the third quarter, including 9 / 1 in Ningbo / Zhoushan, and closed 2 supermarkets in Ningbo. At the end of this report, the company opened a total of 127 supermarkets / 65 small format stores, with a total operating area of 2726.88 square meters. Store 12 stores, of which 9 / 3 are small format stores / supermarkets, and the expansion of small business stores is accelerated.
From January to September, the revenue of supermarkets was + 7.9% compared with the same period last year, and the revenue of small-business stores was + 43.4%, of which Q3 supermarkets + 12% and small-business stores + 42.6%. The company ploughs Zhejiang area, super and small store forms form a chain scale in the region, CPI uplink main business revenue is steady and good.
2. Q3 revenue increased by 13.39% compared with the same period last year, and store expansion accelerated as a drag on net profit performance.
From January to September, the company's revenue increased by 9.71% compared with the same period last year, of which Q3 realized revenue of 1.06 billion yuan, an increase of 13.39% over the same period last year; the net profit of Q3 decreased by 15.78% compared with the same period last year, of which Q3 achieved a net profit of 23 million yuan, down 20.28% from the same period last year. Innovation business and new store investment eroded the company's net profit. With the acceleration of store expansion, the rate of company expenses has increased. The sales expense rate increased by 0.82pct to 18% compared with the same period last year, and the management expense rate increased by 0.51pct to 3.06%, mainly due to the stock purchase fee expenditure of the second phase of the employee stock ownership plan. With increased investment in business innovation, the company's net interest rate fell 0.77pct to 2.54%.
3. New retail technology enables the company's gross profit margin to continue to rise.
BABA's new retail technology enabled the company to achieve a comprehensive gross profit of 23.92% from January to September, a year-on-year increase in 0.51pct. BABA's transformation of the company's supply chain and SKU gradually appeared. According to the company announcement, the procurement plan between the company and BABA from January to September has reached 90.6 million, with an additional 150.8 million yuan expected. With the new retail capacity, the company's gross profit margin is expected to rise further.
Conclusion:
The company accelerates the expansion of its stores in Zhejiang, the new retail capacity can push up the gross profit margin, and the cooperation with BABA is further deepened. We estimate that the company's earnings per share (EPS) from 2018 to 2020 are 0.2,0.21 and 0.23 yuan respectively, of which EPS (- 23.08%yoy) is diluted for 18 years, and the PE corresponding to the current closing price is 64.77,59.25,54.67 times, respectively, with a "recommended" rating.
Risk tips: store expansion is not as expected, investment in business innovation is higher than expected, and regional residents' consumption is under pressure.