19H1 revenue increased by 9%, net profit increased by 2%, and the transfer of shops promoted Q2 to restore revenue growth in a single quarter.
In the first half of 2019, the company achieved an income of 236 million yuan, an increase of 9.02%, a net profit of 12.0603 million yuan, an increase of 2.25%, a non-net profit of 9.1868 million yuan, and an increase of 1.07%. The lower growth rate of profit than income is mainly due to the increase in taxes caused by deferred income tax and the difference in settlement and settlement, as well as the decrease in non-operating income.
Quarter-by-quarter, 2018Q1-19Q2's revenue increased by-13.75%,-9.90%,-39.38%,-10.8%,-5.82%, 27.31%, and its mother net profit increased by-71.39%, 332.58%,-94.53%, 2.65% and 2.13%, respectively. On the revenue side, due to the weak fur consumption at home and abroad in 2018, the company's income continued to decline, and 2019Q2's increased revenue from transfer stores led to a sharp rise in other business income, leading to a return to revenue growth compared with the same period last year. In terms of net profit, 2019Q1's financial expense rate decreased with 4.82PCT, accounts receivable bad debt provision reversed to drive profit growth compared with the same period last year, while the increase in 19Q2 income led to net profit growth, which was lower than income mainly due to the increase in financial expense rate and 5.45PCT.
Domestic and foreign fur consumption is weak, fur income is declining, transfer shops promote other business income growth is higher.
According to the business model, 2019H1's OBM, ODM, OEM and other businesses achieved income of 80.9145 million yuan, 42.347 million yuan, 5.5675 million yuan and 107.6064 million yuan respectively, an increase of-11.25%,-16.14%,-38.51% and 62.65%, respectively. Affected by Sino-US trade frictions and weak domestic downstream clothing demand, the company's fur business revenue declined compared with the same period last year, among which OEM revenue declined greatly due to increased fluctuations in the US dollar exchange rate and the company's adjustment of exports; the company's income from building a fur town and transferring stores led to a substantial increase in other business income.
From a regional point of view, the income of 2019H1's export sales, domestic sales and other businesses reached 50.8677 million yuan, 77.9613 million yuan and 107.6064 million yuan respectively, an increase of-9.62%,-17.45% and 62.65% respectively. Global fur consumption is still relatively low, and the company's fur export and domestic sales income all showed a decline compared with the same period last year.
The gross profit margin of fur business decreased, the gross profit margin of other business increased, and the cost rate decreased.
2019H1 also reduced its gross profit margin by 2.15PCT to 28.66%, of which OBM, ODM, OEM and other business gross margins were 25.18% (- 8.25PCT), 21.57% (- 0.46PCT), 14.49% (- 0.73PCT) and 34.80% (+ 12.04PCT), respectively. Weak downstream demand and intensified market competition led to a decline in fur business gross profit margin, and the company reduced shop rental and sales preferential policies led to a year-on-year increase in other business gross profit margin. The gross profit margin of 18Q1-19Q2 is 33.05% (- 5.28PCT), 25.57% (- 1.82PCT), 24.70% (+ 0.12PCT), 28.21% (+ 3.72PCT), 31.04% (- 2.01PCT) and 26.86% (+ 1.29PCT), respectively. The increase in the proportion of other business income in 19Q2 drives the increase in gross profit margin.
During the 2019H1 period, the expense rate decreased from 1.89PCT to 22.86%, of which the sales expense rate also decreased from 0.83PCT to 9.71%, mainly due to lower expenses such as meetings and travel, etc.; the management expense rate also decreased from 0.37PCT to 9.58%, mainly due to lower employee salaries and insurance premiums; and the R & D expenditure rate also decreased to 2.72%, mainly due to the decrease in raw material and fuel cost items compared with the same period last year. The financial expense rate also decreased to 0.85% by 0.23PCT, mainly due to the decrease in interest expenses and the increase in exchange gains and losses.
The main business of fur is under great pressure, and the construction of fur town leads to the increase of income.
We believe that: 1) the company is the leader of the domestic fur clothing industry, affected by the relatively low domestic clothing consumption and the intensification of trade friction between China and the United States, the main fur industry income growth pressure is greater. 2) the company builds Voss Fur Town, including one-stop winter clothing shopping center, e-commerce incubation park and other projects to sell and transfer shops to all kinds of merchants, leading to the resumption of other business income growth. It is expected that the operation of the fur town will gradually mature in the future, driving the overall income to maintain growth. 3) the gross profit margin of 19H1's main fur industry decreased compared with the same period last year, and it is expected that it will still face the pressure of competition in the industry in the future. The provision of 82.7367 million yuan for impairment of assets of Youshe Science and Technology in 2017 led to a loss for the company. During 2018, the expense rate was high and the net interest rate was low. It is expected that in the future, the company will gradually strengthen the management and control of expense rates, and the impairment of science and technology will be more adequate, and profitability is expected to be restored. 4) on July 18, 2019, the company announced plans to build the Wealth Center of Woss Fur Town, with a construction area of 1.05 million square meters and a planned investment of 360 million yuan to provide office and supporting services for enterprises in the town, which is expected to increase the company's source of income.
As the company's revenue growth is lower than the previous forecast, we downgrade the 2019-20 EPS forecast to 0.05amp 0.05 yuan (the original value is 0.07shock 0.11 yuan), forecast 2021 EPS of 0.06 yuan, the current share price corresponding to 19 years 103 times PE, the valuation is high, maintaining the "neutral" rating.
Risk tips: weak overseas demand, depressed domestic consumer market, RMB exchange rate fluctuations and so on.