The current situation of the company

Recently, we conducted a grass-roots survey of some of the company's stores:

Comment

1. Focus on the main business of the supermarket. We expect to be limited affected by the epidemic. The supermarket sector mainly sells fresh food, daily necessities and other daily necessities, benefiting from the increase in consumer demand for hoarding, we expect that the industry as a whole will be limited affected by the epidemic. The company is mainly engaged in large-scale comprehensive chain supermarkets and fresh supermarkets, and has established a perfect fresh commodity base and fresh processing and distribution center to effectively support the needs of people's livelihood. We expect the epidemic to have a limited impact on the company's main business.

2. The competition in the industry continues to intensify, and the main industry is under pressure. In recent years, the growth of the main business of the company's supermarkets has been under pressure, mainly due to a decline in the number of customers in stores affected by increased competition in the industry, resulting in pressure on the performance of the same store. To this end, the company actively promotes the upgrading of existing stores and the expansion of new stores, opening / closing 7 / 2 of Life supermarkets in the first three quarters of 2019, with a net increase of 5 to 165 stores compared with the beginning of the year, and is expected to open 10-20 stores for the whole year. the company actively promotes project location and business circle research to ensure the quality of signing contracts to improve the success rate of new stores.

3. Follow up to pay attention to the changes in the operating efficiency of the company's stores. In terms of operation, the company optimizes the commodity structure, introduces best-selling goods and new products, eliminates low flat efficiency and unsalable products, and focuses on the operation of fresh products to improve the number of customers in stores and flat efficiency; in terms of leasing, the company establishes a leasing evaluation system to improve the shop rental rate, strictly control the leasing brand and quality; in addition, the company orderly enhances the innovative service capabilities of community group buying and electronic members to strengthen comprehensive competitiveness. Under the influence of low base and non-operating factors, we expect that the company's profit side will still fluctuate greatly in the future, so we need to continue to pay attention to the changes in the operating efficiency of the company's main supermarket business.

Valuation proposal

Keep the profit forecast for 2020 unchanged, and introduce the profit forecast of 0.12 yuan per share for 2021. The current share price corresponds to 2019-2021 on 43-37-33 times Pmax E. Maintain the neutral rating, but based on the recent decline in market risk appetite, cut the target price by 2.3% to 4.20 yuan, corresponding to the 2019-2021 47-38-35 times Pmax E, there is 6% room to rise.

Risk

The competition in the industry intensified and the performance of the new stores fell short of expectations.