2018 performance is in line with expectations
Youngor's income in 2018 was 9.635 billion yuan, down 2.1 percent from the same period last year, and its net profit was 3.677 billion yuan, up 1139.1 percent from the same period last year, corresponding to earnings per share of 1.03 yuan. The performance was in line with expectations, with a relatively large growth rate due to a low base due to the provision of large asset impairment in 2017. 1Q19's revenue increased by 53.3% to 2.578 billion yuan, while net profit increased by 48% to 754 million yuan.
The income of the clothing business increased by 13.2% to 5.64 billion yuan, accounting for 59% of the total income, and the net profit increased by 9.3% to 830 million yuan. By channel, online revenue increased by 11.7%, accounting for 3.7% of clothing revenue. The number of offline stores was 2258, and 98 stores were cleared during the period. the revenue of direct stores and franchise stores increased by 4.4% and decreased by 7.3% respectively. Gross margin rose 1.6ppt to 65.7 per cent year-on-year. In 2018, the company will continue to focus on big stores, member marketing and O2O strategy.
Income from the real estate business fell 17.8 per cent to 3.99 billion yuan, contributing 41 per cent to total income, and net profit fell 14.5 per cent to 1.05 billion yuan. New construction of 480000 square meters was started during the reporting period. The amount of pre-sale increased by 3.9% to 8.49 billion yuan over the same period last year, with a total pre-sale area of 309200 square meters. At the end of the period, the land reserve area is 387000 square meters.
Investment business income increased by 5.3% to 3.21 billion yuan. The equity method calculates the increase in property insurance income, dividends and financial income of Ningbo Bank and Zhejiang businessmen. At present, Youngor has invested a total of 33.2 billion yuan.
The increase in gross profit margin to 3.8ppt to 50% was mainly due to a decline in the proportion of income from the real estate business with low gross margin; the rate of sales management expenses increased by 3.1ppt to 30.5%; and the loss of asset impairment dropped sharply to 270 million yuan (2017: 3.19 billion yuan). Cash flow from business activities fell 28.4% year-on-year to 2.72 billion yuan, due to an increase in land acquisition expenditure in the real estate sector.
Trend of development
The company plans to increase its annual revenue by about 20% in 2019. The clothing business continues to open large stores; the real estate business is expected to start five new projects and increase the salable area by 373000 square meters; in the future, it will further focus on the main business, in addition to strategic investment and continue to fulfill investment commitments, it will no longer carry out financial equity investment in non-main business areas, and will choose the opportunity to dispose of existing projects.
Profit forecast
Keep the profit forecast for 2019 unchanged and introduce the forecast for 2020. It is estimated that the net profit per share in 2019 and 20 is 1.15 yuan and 1.25 yuan, an increase of 12.2% and 8.5% over the same period last year.
Valuation and suggestion
At present, the company's share price corresponds to 8.3 times / 7.6 times 2019 pound E. Maintain the neutral rating, due to the segment valuation plus total update headline price of 28% to 10.37 yuan, given by the apparel (12 times 2019), real estate (DCF), investment (fair value) segment valuation, and give a 25% discount on multiple valuation on the aggregate basis; implied 8.7% upside space.
Risk
Uncertainty in the settlement of real estate and investment business income.