The development of Internet-related business stagnated, with revenue down 7.16% and net profit down 124%.
In the first half of 2019, the company realized income of 364 million yuan, down 7.16%, net profit of-5.9088 million yuan, 18H1 of 4.7632 million yuan, non-net profit of-7.4552 million yuan, 18H1 of 1.9296 million yuan, and EPS of-0.02 yuan. The company's performance loss is mainly due to the adjustment of development strategy, the stagnation of Internet business development and the significant asset restructuring of the company, which leads to the increase of management expenses and the loss of fixed assets disposal.
Quarter by quarter, 2018Q1-19Q2's revenue increased by 11.47%, 51.31%, 45.02%, 25.24%, 23.09%,-27.77%, while the net profit returned to its mother increased by 81.03%, 552.85%, 240.18%, from profit to loss,-38.27%, from profit to loss. 19Q2's revenue declined compared with the same period last year, mainly due to the company's temporary investment in Internet business and a decrease in revenue compared with the same period last year. 19Q2's loss was mainly due to a significant decline in gross profit margin and an increase in the rate of sales and management expenses compared with the same period last year.
Internet business drags down gross profit margin, and the cost rate increases at the same time.
Gross profit margin: 2019H1 reduced its gross profit margin to 35.28%, including 36.47% and 2.13% for home textile and Internet business, as well as 2.19PCT and 63.43PCT. The stagnant development of Internet business led to a large decline in gross profit margin. The gross profit margin of 2018Q1-19Q2 was 39.29% (+ 0.13PCT), 44.63% (+ 5.86PCT), 40.15% (+ 2.51PCT), 33.43% (- 5.73PCT), 36.18% (- 3.11PCT) and 34.24% (- 10.39PCT). The gross profit margin of 19Q1-Q2 Internet business decreased significantly.
Expense rate: during the period of 2019H1, the expense rate increased by 4.28PCT to 35.05%, of which the sales expense rate increased by 2.12PCT to 21.77%, mainly due to the increase in the company's labor costs, rental fees, terminal expansion and construction fees, etc.; the management expense rate also increased by 2.42PCT to 12.96%, mainly due to the year-on-year increase in labor costs and intermediary fees The financial expense rate also decreased to 0.32% by 0.26PCT, mainly due to a reduction in interest expenses.
Development strategy adjustment, major asset restructuring and replacement of controlling shareholders
We believe that: 1) the company adjusts its development strategy and focuses on expanding home textile business. The income of 2019H1 home textile business is 351 million yuan, an increase of 4.35%. In the future, the company will suspend investment in the development of unstable Internet business and continue to expand second-and third-tier cities to drive the growth of home textile main business income. 2) the delayed investment of Internet business is a drag on the company's gross profit margin, the gross profit margin of home textile business is relatively stable, and the proportion of Internet business income is declining in the future, which weakens the impact on gross profit margin. 3) on April 14, 2019, shareholders Chen Jun and Huang Yani planned to transfer 29.83% of the company's shares to Zhejiang Construction Group. After the completion of the transfer, Zhejiang Construction Group became the largest shareholder of the company. On July 6, the company disclosed that it planned to absorb and merge 100% equity of Zhejiang Construction Investment Group by means of asset exchange and share issuance. Zhejiang Construction Group is mainly engaged in construction investment, design, construction, operation, etc. To build an international construction investment operator.
Due to lower-than-expected profit growth, we downgraded the 2019-20 EPS to-0.01max 0.02 yuan (the original value is 0.28pm 0.33 yuan), and forecast EPS of 0.02 yuan in 2021, maintaining the "neutral" rating.
Risk tips: weak consumption, fierce competition in the home textile industry, shareholder reduction risk and so on.