Investment suggestion

Downgrade Youngor to neutral rating, lowering the target price by 29% to 8.12 yuan per share, the target price is given by segment valuation, implying 17% upside space. The reasons are as follows:

The results for the whole year of 2017 and the first quarter of 2018 were lower than expected: the company's revenue in 2017 was 9.84 billion yuan, down 33.9% from the same period last year; and net profit was 297 million yuan, down 91.9% from the same period last year.

The lower-than-expected performance was due to (1) the decrease in the carry-over projects in the income-side real estate sector and (2) the provision of 3.3 billion yuan for CITIC Limited's impairment. 4Q17's single-quarter revenue fell 43.9% and turned into profit and loss compared with the same period last year. 1Q18's revenue was 1.682 billion yuan, down 50.5% from the same period last year, and its net profit was 509 million yuan, down 59.6% from the same period last year.

Uncertainty in the real estate and investment business reduces earnings visibility: in 2017, due to a decrease in carry-over projects, revenue fell by 52.7%, net profit fell by 18.6%, and pre-sale increased by 39.8%. Investment business income dropped 5.5%. In 2016, the company changed the accounting method of Lianchuang Electronics, resulting in an investment income of 1.37 billion yuan, but there was no such factor in the current period.

The outlook for the clothing business is positive, but the growth has been diluted by other businesses: in 2017, the offline clothing business achieved 12.1% revenue growth in the case of clean stores. The company focused on the big store strategy, same-store sales continued to record growth, de-inventory basically ended. The revenue of the clothing business is expected to grow by 1015% in 2018, but historically, the performance of the clothing business is easily diluted by the profit fluctuations of the other two businesses: the net profit of the clothing business in 2017 increased by 39% to 760 million yuan compared with the same period last year, while the net loss of the investment business was 1.79 billion yuan.

What is the biggest difference between us and the market? The uncertainty of real estate and investment business is greater, and the mixed operation brings more obvious valuation discount.

Potential catalyst: steady growth of clothing business.

Profit forecast and valuation

The earnings per share forecast for 2018 is lowered by 11% to 0.46 yuan, and the earnings per share forecast for 2019 is lowered by 10% to 0.52 yuan, corresponding to a year-on-year increase of 461% and 12%.

At present, the company's share price corresponds to 15 times, 13 times 2018, 19-year Pram E. Downgrade to neutral rating, with a target price of 29% to RMB8.12. The target price is given by apparel (12 times 2019), real estate (DCF) and investment (fair value) segments, with a 40% discount on multiple valuations on a combined basis. The new target price corresponds to 16 times 2019 overall Pamp E, implying 17% upside space.

Risk.

Uncertainty in the settlement of real estate and investment business income.