The performance is below our expectations.
The company announced its 2019 results, with revenue of 10.909 billion yuan, an increase of 2.12% over the same period last year; net profit of 160 million yuan, down 28.9% from the same period last year, corresponding to a profit of 0.2 yuan per share; and net profit of 106 million yuan, down 49.2% from the same period last year, lower than we expected. On a quarter-to-quarter basis, Q1-Q4 's revenue is + 9.6% compared with the same period last year, and the net profit is + 5.7%, 66.9%, 202.9%, 101.7% respectively. We expect that the decline in Q4 revenue is mainly related to increased competition in the regional market, with a sharp decline in profits over the same period, mainly affected by the decline in gross profit margin and the provision of large asset impairment losses.
Trend of development
1. The company's revenue grew by 2.12% in 2019, which is slower than that in 2018. In terms of business format, ① department store (including home appliances) achieved revenue of 6.416 billion yuan, down 1.27% from the same period last year; ② supermarket achieved revenue of 3.763 billion yuan, an increase of 5.55%, accounting for 34.5% of total revenue; and ③ agricultural products trading market achieved revenue of 319 million yuan, an increase of 4.90% over the same period last year, which is relatively sound The income of ④ 's real estate sales business reached 411 million yuan, an increase of 30.78% over the same period last year, mainly driven by rapid revenue growth in the first half of the year, while the growth rate in the second half of the year declined significantly compared with the same period last year.
2. Cost control needs to be improved. In 2019, the company's gross profit margin increased to 19.8% compared with the same period last year, which is mainly driven by the real estate sales business with high gross profit margin. From the expense point of view, the sales expense rate increased by 0.3ppt to 4.7%, the management and R & D expense rate increased by 0.3ppt to 9.9%, and the financial expense rate increased to 0.3% year-on-year, mainly due to the increase in loan interest expenses. In addition, driven by net income from large fair value changes and losses in Huarong consumer financial investment, the final net interest rate fell 0.6ppt to 1.5% year-on-year, while net interest rate after deducting non-profit fell 0.98ppt to 0.97% year-on-year.
3. Due to the impact of the macroeconomic downturn and the intensification of market competition, the company's retail business growth is expected to be under pressure. In this context, the company speeds up the upgrading and transformation of various business formats: the department store uses the digital system, and the channel sinks to the county-level market; Hejiafu supermarket gradually carries out home and store pick-up business, which is now online on ele.me and multi-point platforms; agricultural products business to promote online store encryption, the development of direct mining, broaden investment channels. In addition, as the regional retail leader controlled by SASAC, the company does not rule out the possibility of improving quality and efficiency through the reform of state-owned enterprises.
Profit forecast and valuation
In view of the impact of the epidemic, the company lowered its earnings per share forecast for 2020 by 41% to 0.17 yuan, and introduced a profit forecast of 0.20 yuan per share in 2021. The current stock price corresponds to 25 times earnings per share in 2020x2021. To maintain the outperform industry rating, the target price was lowered by 6% to 5.45 yuan, corresponding to 2020 Universe 2021 32 Universe 27 times Pamp E, the current share price has 11% room to rise.
Risk.
The competition in the industry intensified; the investment losses of the associated enterprises intensified.