Event: according to the company's quarterly report, 19Q1 achieved revenue of 92.09 million yuan, down 6.7% from the same period last year, and realized net profit of 14.96 million yuan, down 28.5% from the same period last year. After deducting non-return, the net profit was 13.07 million yuan, down 31.8% from the same period last year.
The rapid increase in costs is a drag on performance. 19Q1 raised its gross profit margin by 3.2pp to 56.5%, but sales expenses increased by 34.7% over the same period, and sales expense rate increased by 9.2pp to 29.8%, resulting in a decline in net profit margin of 5pp to 16.3%. The increase in sales expenses is mainly due to the increase in the number of direct stores and the increase in store fees and promotion costs compared with the same period last year. The company has three independent brands: medium-and high-grade brand rabbi, mid-range brand next generation and baby care products Baby rabbi, for differential positioning. In terms of product categories, by the end of the 18th, the proportion of infant clothing and maternal and infant cotton products remained stable, while other maternal and infant products (maternal and infant care products, etc.) grew rapidly, up 37.3% from the same period last year, and the proportion of revenue rose to 25.5%. On the channel, the company has formed an omni-channel marketing model of "self-management + joining + e-commerce + WeChat business", forming a compound marketing model of offline shopping malls counters, shopping centers and brand stores, supplemented by online flagship stores. By the end of 2018, the company has 253 rabbi and next-generation stores and 1115 franchise stores, with a total of 1368 terminal image stores, covering first-to fourth-tier cities in China. "Baby Rabbi (BABY LABI)" is a wholesale operation. The company also conducts network-wide marketing through its own platform and e-commerce platforms such as Tmall, Taobao, JD.com, Vipshop Holdings Limited, NetEase, Inc koala and WeChat merchants to promote the coordination of online and offline marketing.
Strengthen investment and cooperation to create a rabbi mother-baby ecosystem. In 2018, the company made a series of investments to continuously improve the ecological circle. in addition to the integration of internal structure, 4 newly established and transferred local wholly-owned subsidiaries (Wuhan, Shenyang, Xiamen, Shantou) were cancelled. Ningbo Jiangbei Yunqin Management Consulting Co., Ltd. was transferred to Ningbo Jiangbei Yunqin Management Consulting Co., Ltd. in September, 100% equity was transferred to Ningbo Jiangbei Yunqin Management Consulting Co., Ltd., and then acquired 10% equity in each of the three target companies, namely, Shanghai BABA Baby Baby products Co., Ltd., Little White Bear (Shanghai) Maternal and Child products Co., Ltd., and Shanghai Shangling Network Technology Co., Ltd.
Little White Bear is a well-known brand in the market segment of maternal and infant electrical appliances, and the company has officially entered the market of maternal and infant electrical appliances. This is an important step for the company to build the whole industrial chain of mother and child business after investing in baby food, child care services, maternal and child health and acting as an agent in the past 17 years, which can not only enrich product categories and enhance brand effect. it is also conducive to the extension of high-quality business related to infants and children in the future. Due to the previous acquisition of Jiangtong animation performance is not as expected, 18 annual report of 3000 million impairment losses, resulting in a significant decline in performance than previously expected.
Profit forecast and rating. Due to the sinking of the company's power channel this year, expenses continue to remain high and adjust the profit forecast. It is estimated that from 2019 to 2021, the EPS of the company will be 0.2,0.23,0.27 yuan respectively, corresponding to 30 times, 26 times and 22 times of PE.
Risk hint: the risk that terminal sales growth is less than expected; the risk that the extension layout is lower than expected.