Affected by bank loans, the shortage of capital caused global and Qianhai to have insufficient delivery during the peak season. The company's revenue growth in 18Q4 and 19Q1 slowed to 9%/2%, respectively. At the same time, the company's net profit in 18/19Q1 fell 17%/15%, respectively, due to the increase in inventory price declines. Looking at the short term, bank credit policy adjustments have put pressure on the company's short-term performance. It is expected that the company's loan pressure will improve slightly at the beginning of Q2, but considering that the company has continued to be underprepared for 2 quarters, it is expected that the increase in C-side purchasing activity will lag slightly. Therefore, it is expected that stock prices will be at the bottom of consolidation in the near future; in the medium to long term, the company's core competitiveness built at the level of logistics system, supply chain system, private brand system, intelligent customer service, intelligent marketing system, etc. is still at the leading level of the industry. It is expected that the GMV growth rate will recover somewhat later when the pressure on capital companies eases

Revenue continued to grow at a high level in 2018, and profits declined due to a sharp increase in inventory prices. In 2018, the company achieved revenue of 21,534 billion yuan, an increase of 53.62% over the previous year. The profit side was affected by a sharp increase in inventory price declines. The operating profit/return net profit amount fell 19.71%/17.07% year-on-year, achieving earnings of 0.41 yuan per share. The distribution plan was a cash dividend of 0.45 yuan (tax included) for every 10 shares. On a quarterly basis, Q4 was affected by bank loan drawing, and marketing investment and preparation funds declined, which dragged down the revenue growth rate in a single quarter to 8.83%; at the same time, asset impairment amounts increased by 4.7 billion yuan, resulting in operating profit/net profit attributable to mother losses of 226 million yuan and 205 million yuan respectively. The weak situation continued in 19Q1. Revenue/operating profit/net profit attributable to the mother increased 2.19%/-14.94%/-15.29%, respectively.

The year-on-year revenue growth rate in 18Q4/19Q1 slowed to 8.83%/2.19% due to insufficient marketing and preparation funds due to bank loan drawing.

1) Global Tesco's revenue declined markedly in 18Q4: Global Tesco's revenue increased 8.44% year-on-year to 12.4 billion yuan in 2018. Affected by the calculation of falling inventory prices, it achieved net profit of 248 million yuan, a year-on-year decrease of 65.31%. Among them, revenue declined 25.60% in 18Q4. By business, self-operated cross-border exports increased 9.19% year on year throughout the year. Among them, GB revenue from electronic stations increased 6.96% year on year to 4,591 billion yuan, and clothing website revenue increased 12.23% year on year to 3,538 billion yuan. Third-party exports increased 25.68% year-on-year to 3,939 billion yuan. Cross-border import business revenue fell 45.35% to 369 million yuan.

2) Qianhai Patson was affected by new product development and price increases on the Amazon platform, and profit growth was less than revenue growth. Revenue in 2018 increased 40.95% year-on-year to 3.417 billion yuan, and Guimu's net profit increased 23.78% year-on-year to 238 million yuan. Among them, revenue and net profit growth in 18Q4 were 13.52%/-13.64%. The reason the profit growth rate fell short of the revenue growth rate is that the company has been increasing its new product development and promotion efforts since the second half of '18. At the same time, with the increase in sales scale, logistics and warehousing costs have also increased accordingly. Combined with the impact of price increases on the Amazon platform, the rate has increased rapidly.

3) Youyi is developing steadily and has achieved the promised performance goals for the whole year. Revenue from February to December 2018 increased 57.88% year on year to 5.611 billion yuan, and net profit of the mother increased 52.16% year on year to 290 million yuan.

The merger of superiority led to a decline in gross margin, but refined management and fee control capabilities increased, and the expense ratio declined. At the same time, the net profit margin fell 2.62 pct to 2.85% in 2018 due to a sharp increase in inventory price reductions.

1) The company's comprehensive gross margin fell 9.19PCT to 40.58% year-on-year in 2018, mainly affected by the combination of the low gross profit of Youyi E-commerce.

2) In the context of superior consolidation and refined operation of the original main business, the cost rate for the period fell sharply by 7.86PCT to 34.34%. Among them, sales expenses fell 6.95PCT to 31.51% year on year, operating expenses fell 0.20 PCT to 1.97% year on year, and financial expenses fell 0.71 PCT to 0.86% year on year.

3) Asset impairment losses increased by 468 million yuan in 2018, of which losses on bad debts increased by 33.94 million yuan and losses from falling inventory prices increased by 433 million yuan.

In 19Q1, net profit margin fell 1.01 pct to 4.66% year on year due to a decrease in gross margin greater than the reduction in cost ratio and a slight increase in asset impairment.

1) Affected by the merger of Youyi in February '18, the company's comprehensive gross margin fell 1.41pct to 43.3% year-on-year in 19Q1.

2) The period expense rate decreased by 0.91 pct to 36.95%, where the sales expense rate/management expense rate/period expense ratio was -2.2 pct/+1.93pct/ -0.63%, respectively.

3) Inventory price drop losses increased 4.09 million yuan, and bad debt losses increased by 16.59 million yuan.

Fine management capabilities have been strengthened, and inventory and cash flow indicators have improved, but due to the extension of the repayment cycle of the tripartite platform, the size of accounts receivable has grown rapidly.

1) Inventory growth in 2018 was slower than revenue growth. At the end of 2018, the company's net inventory increased 30.57% year-on-year to 5.066 billion yuan, mainly due to the merger of superiors and the expansion of the sales scale of the main business and the increase in inventory. The inventory size reached 47.14 at the end of 19Q1, an increase of 7.74% over the previous year, and is in a healthy range.

2) The year-on-year increase in accounts receivable at the end of 18/the end of 19Q1 was 153.98%/56.86%, respectively. The reason for the rapid growth in accounts receivable is due to the merger of premium accounts and the extension of the payment settlement cycle on the third party platform.

3) Net cash flow from operating activities turned positive. At the end of 2018 and the end of 19Q1, the net cash flow from the company's operating activities was 183 million yuan/53 million yuan respectively. The cash flow situation improved.

Investment advice and profit forecasting: In the medium to long term, the core competitiveness built by the company at the logistics system, supply chain system, private brand system, intelligent customer service, and intelligent marketing system, starting from the data and technology side, is still at the leading level of the industry. However, in the short term, bank credit policy adjustments have put pressure on the company's short-term performance. It is expected that the company's loan pressure will improve slightly at the beginning of Q2, but considering that the company has continued to be underprepared for 2 quarters, it is expected that the increase in C-side purchasing activity will lag slightly. Temporarily lower the 2019-2012 EPS to EPS to 0.66, 0.85, and 1.16 yuan. The current market capitalization is 17.3 billion yuan, corresponding to 19PE18X, affected by short-term financial pressure. It is expected that the stock price will consolidate at the bottom in the near future, and temporarily adjust the rating to “prudent recommendation - A”

Risk warning: industry policy risks exceed expectations; new business development such as imports falls short of expectations; pledge risk.