Core viewpoints

In the first half of 17 years, the company's operating income and net profit increased by 3.48% and 47.92% respectively compared with the same period last year, and the net profit after deducting non-profit increased by 44.94%. In the second quarter, operating income and net profit increased by 11.75% and 63.57% respectively, with a significant month-on-month increase in profit growth. The company reported an increase of 8 shares for every 10 shares, and the company expects the change in net profit in the first three quarters of 17 years to be between 25% and 65%.

The effective control of the expense rate during the period is the main reason why the profit growth rate is much higher than the income growth in the first half of the year. In the first half of the year, the company's comprehensive gross profit margin fell 0.45pct compared with the same period last year, during which the expense rate decreased 7.52pct, in which the sales expense rate decreased significantly 9.04pct, mainly due to the reduction in the number of direct terminals, the management expense rate increased 1.72pct, and the increase in interest income led to a decrease in financial expenses.

In the first half of the year, the overall operating quality of the company was sound, and the net cash flow of operating activities increased by 358.90% compared with the same period last year. At the end of half a year, the company's inventory decreased by 16.10% compared with the beginning of the year, and accounts receivable increased by 8.26% over the beginning of the year. As of the end of June 17, the company has nearly 1300 terminal stores.

The company's texture is solid and robust, relying on multi-brand and multi-category layout is expected to get a broad space. In the depressed market environment, the company's main business still maintains steady growth, leading channels and R & D advantages, is a rare sub-industry leading secondary new shares. The company's multi-brand and multi-category strategy is in line with the characteristics of the underwear industry, and the multi-brand layout in the underwear field has achieved complete coverage of all market segments. and the multi-category test in the field of beauty and makeup will also lay a good foundation for the company's possible continuous extension of consumer goods in the future.

Financial forecasts and investment suggestions

According to the China News, we downgrade the company's revenue growth and period expense rate forecasts for the next three years, and the company's earnings per share are expected to be 1.21,1.41 and 1.62 yuan respectively from 2017 to 2019 (originally predicted to be 0.93,1.08 and 1.26 yuan). Refer to the company's average valuation level in 2018 and give it 28 times PE valuation, corresponding to the target price of 39.48yuan, maintaining the company's "buy" rating.

Risk hint

Market demand risk, multi-brand, multi-category operation risk, inventory backlog risk, raw material price fluctuation risk.