Event
The company disclosed that the revenue in the first half of the year was 2.095 billion yuan / + 0.87%, the net profit was 112 million yuan / + 97.04%, and the net profit of non-return mother was 6431 yuan / + 44.67%.
Among them, the revenue in the second quarter was 952 million yuan /-0.96%, and the net profit returned to the mother was 5837 yuan / + 214.97%.
Main points of investment
The reduction of supermarket stores affects revenue growth, fixed increase landing and Hangzhou Zhejiang Sea transfer push up the net interest rate: at the revenue end, the company's revenue growth rate slowed down in the first half of the year, mainly due to a 3.6% decrease in store area compared with the same period last year. Hangzhou Zhejiang Sea 2018 revenue share of about 7% May transfer affects revenue growth. In the first half of the year, the flat efficiency of the company's supermarket increased by 3.5%, and the good endogenous growth trend continued. On the profit side, Q2's transfer of Hangzhou Zhejiang Huadi decided to benefit 16.98 million yuan from investment and recover 12.33 million yuan from the previous market development expenses. In the second half of last year, Aliding reduced the financial expense rate by 1.87pct to-2.36%, and the net interest rate increased significantly to 5.35% compared with the same period last year, boosting profit growth.
The reduction of supermarket stores reduces the company store area, and the good endogenous growth trend continues: in terms of stores, the number of supermarket stores decreases and the company store area decreases. By the end of June, the company had a total of 202 stores, including 123 supermarkets and 79 small-scale stores. In the first half of the year, 6 new small business stores were opened, 2 supermarkets were closed, 2 small business stores were closed, and 2 Hangzhou Zhejiang Sea Huadi supermarkets were transferred. The number of stores was the same as that at the end of last year, and the signed area of opening stores at the end of the period decreased by 3.6% compared with the same period last year. At present, the company has signed a contract to open 14 stores, including 8 supermarkets and 6 small-scale stores.
By category, fresh revenue increased by 8.8%, and gross profit margin continued to rise. In the first half of the year, revenue from food, fresh food, daily department stores and knitting accounted for about 51%, 31%, 17% and 1.6%, respectively. The company has gradually expanded its fresh business area and improved the shopping environment. Revenue from fresh products has increased by 8.76%, while revenue from food and daily department stores has decreased by 2.96% and 1.45% respectively. First, the company category is more focused on three meals a day, and second, the area of its stores has decreased compared with the same period last year. BABA supply chain cooperation to strengthen the source procurement of goods from the company base, promote the gross profit margin of major categories to increase, in the first half of the year, food gross profit margin increased to 21.22%, fresh increased 1.10pct to 17.36%.
From a sub-channel point of view, the flat efficiency of supermarkets increased by 3.5%, and the revenue of small businesses increased by 40%. In the first half of the year, the revenue of the company's supermarket and small business accounted for about 92% and 8.5%, respectively. Two supermarkets in Hangzhou Zhejiang Sea Huadi listed in the first half of the year, and the above two supermarkets accounted for about 7% of the company's revenue in 2018, so the company's supermarket revenue fell 2.3% compared with the same period last year. If the flat efficiency is taken into account, the contracted area of supermarket stores in the first half of the year decreased by about 5.6% compared with the same period last year, and the average flat efficiency increased by about 3.5%. The good endogenous growth trend continued. Small format channels continue to expand, sub-new stores gradually force, revenue growth of 40% year-on-year.
Increase in direct mining promotes gross profit margin upward, fixed increase and landing and Hangzhou Zhejiang Sea transfer push up net profit margin: in terms of profitability, the increase in the proportion of direct mining promotes gross profit margin by 0.84pct to 24.70% compared with the same period last year, the omni-channel transformation of supermarkets increases the rate of sales expenses to 18.97%, and departmental streamlining and process simplification reduce the rate of management expenses by 0.33pct to 2.90%. The fixed increase of BABA in the second half of last year reduced the financial expense rate by 1.87pct to-2.36%. In addition, the transfer of Hangzhou Zhejiang Huadi decided to benefit from 16.98 million yuan of investment, recovered 12.33 million yuan of early market development expenses, and finally raised the company's net interest rate to 5.35% in the first half of the year.
In terms of inventory, the company's inventory in the first half of the year decreased by 24% to 247 million yuan compared with the end of last year, accounting for a continuous decline in revenue. The company's omni-channel transformation and meticulous management boosted operating efficiency.
Investment advice: Sanjiang Shopping is based on Ningbo's regional supermarket leader, Hangzhou Zhejiang Huadi table to promote profit growth. Fund-raising projects bring channel extension, new retail transformation promotes endogenous growth, and works with BABA to improve the efficiency of the supply chain. We predict that the company's earnings per share from 2019 to 2021 are 0.26 yuan, 0.29 yuan and 0.31 yuan respectively. Return on equity is 4.6%, 4.9% and 5.3%, respectively, and the current share price PE (2019E) is about 56 times, maintaining the "value-added-A" recommendation.
Risk tips: the cooperation with BABA may not be as expected; the reduction of supermarket stores will affect revenue growth; the effect of retail transformation may not be as expected; the investment in the early stage of channel expansion will increase the cost.