The 2018 performance is in line with KuaiBao and his expectations
Smith Barney announced its 2018 results: revenue was 7.677 billion yuan, an increase of 18.6% over the same period last year; turning losses into profits recorded a net profit of 40.36 million yuan per share, corresponding to a net profit of 0.02 yuan per share. Deducting 12.69 million yuan from non-net profit also reversed losses compared with the same period last year (non-recurrent gains and losses mainly include government subsidies, etc.). The company will not pay dividends during the period. The performance is in line with the company KuaiBao. 4Q18's revenue in a single quarter increased by 5% to 2.13 billion yuan, and turned a small profit of 220000 yuan, an improvement from the third quarter.
The channel recovers, the new brand income performance is more ideal. According to the channel, the revenue of direct stores increased by 7% compared to that of stores, and the revenue of franchises increased by 33%, reversing the decline in 2017. By brand, Metersbonwe brand revenue grew 13 per cent; high-end brand ME&CITY grew 48 per cent for the year, accelerating from 21 per cent in 2017; and children's clothing brands Moomoo and ME&CITY KIDS grew 24 per cent, down slightly from 32 per cent in 2017. By product, the income of men's wear, women's wear and children's clothing increased by 11%, 31.6% and 25.3% respectively. In terms of volume and price, the company's revenue growth is mainly driven by volume growth (sales increased by 19.3%).
Annual cost control has achieved certain results. Gross profit margin fell 2.7ppt to 44.1% year-on-year; annual sales management expense rate fell 4.8ppt to 39.3% year-on-year. Although the amount of asset impairment loss is still relatively large (313 million yuan, of which inventory impairment accounts for 7.3% of the inventory book balance at the beginning of the period), government subsidies and investment income from Huarui Bank have led to a positive operating profit, and the net profit margin increased by 5.2ppt to 0.5% compared with the same period last year. The cash flow of operating activities changed from negative to positive to 622 million yuan, thanks to a turnround and reduced inventory pressure.
Trend of development
The company announced on February 1 that it plans to raise no more than 1.5 billion yuan in non-public offerings to be used for brand upgrading and product supply chain transformation projects. specific investment mainly includes new direct stores, diversified brands and wisdom stores upgrading and information technology management system transformation.
Profit forecast
Taking into account the company's high performance flexibility at the break-even point and the recent upgrades of brands, products, channels and retail implementation, raise the profit forecast for 2019 by 27% to 0.1 yuan, and introduce the profit forecast for 2020 by 0.13 yuan, corresponding to a year-on-year increase of 493% and 34%.
Valuation and suggestion
The company's current share price corresponds to 33 times and 25 times the price of PCME in 2019 and 2020. Due to the increase in the profit forecast, the target price will be raised by 15% to 3.42 yuan, corresponding to twice as much as PCMG S in 2019 (because it is still in a state of thin profit), implying 8.8% room for increase; however, considering the fierce competition between domestic and foreign brands in the casual wear industry and the company's profit outlook is still uncertain, maintain a neutral rating.
Risk.
Sales recovery and cost control fell short of expectations.