Event
The company disclosed three quarterly reports. Revenue in the first three quarters was 3.075 billion yuan, down 2.12% from the same period last year. Net profit returned to the home was 137 million yuan, up 70.92% from the same period last year, and basic earnings per share was 0.25 yuan. Of this total, the revenue in the third quarter was 980 million yuan, down 7.94% from the same period last year, and the net profit returned to the mother was 24.45 million yuan, an increase of 6.29% over the same period last year.
Main points of investment
Hangzhou Zhejiang Sea table affects revenue, and net profit increased steadily in the third quarter: at the end of revenue, the company's Q1, Q2 and Q3 achieved revenue growth of 2.4%,-0.1% and-7.9% respectively, and revenue growth slowed down in the third quarter. mainly due to the closure of shops in the first half and the release of Hangzhou Zhejiang Sea. Hangzhou Zhejiang 2 box horse stores accounted for about 7% of the company's revenue in 18 years, and the transfer table affected the revenue growth rate. At the net profit end, the company's Q1, Q2 and Q3 achieved a net profit growth of 40%, 215% and 6.3% respectively. The net profit grew steadily in the third quarter, and the slowdown was mainly affected by the decline in revenue in a single quarter.
BABA invested in the ground to boost the net interest rate, and inventory turnover continued to be faster than comparable companies: in terms of profitability, the increase in the proportion of direct mining in the third quarter pushed gross profit margin slightly higher than the same period last year by 0.06pct to 24.12%, omni-channel transformation and store expansion increased sales expense rate by 1.25pct to 20.06%, and management expense rate increased by 0.27pct to 3.01% compared with the same period last year. The landing of BABA's investment pushed the financial expense rate down to-2.62% year-on-year, and the company's net interest rate eventually increased to 2.49% from the same period last year. In terms of inventory, Sanjiang Shopping inventory turnover in the first three quarters of about 7.7, continues to be higher than Yonghui supermarket, Jia Jiayue and other comparable companies. In terms of cash flow, the cash inflow and outflow of the company's operating activities fell by 6.5% and 7.0% respectively in the third quarter, and the final net operating cash flow decreased slightly by 1.9% compared with the same period last year.
Fund-raising projects are expected to promote scale growth: the non-public offering fund-raising projects launched in 2018 will be revised, and new chain supermarket development projects will be added, with an investment of 400 million yuan to open 100 small stores and 30 community stores within three years.
By 2022, the number of supermarkets in the company is expected to reach about 160, with a compound annual growth rate of about 7%, and the number of neighborhood stores is expected to be nearly 180, with an annual compound growth rate of about 26%. The orderly expansion of the number of channels is expected to promote the company's revenue to continue to improve.
Investment suggestion: Sanjiang Shopping is a regional supermarket leader based in Ningbo. Huadi in Hangzhou and Zhejiang affects revenue. 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 0.29 yuan, 0.28 yuan and 0.31 yuan respectively. The return on equity is 5.0%, 4.9% and 5.3%, respectively. At present, the company's PE (2019E) is about 50 times, maintaining the "holdings-A" proposal.
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.