The 2019 performance was lower than our expectations, and the 1Q20 performance was better than our expectations. The company announced 2019 results: revenue of 4 billion yuan, an increase of 2.9%, and a net profit of 10.37 million yuan, an increase of 2.6%. The performance was stable compared with 2018, but it was still lower than our expectations because of the limited income growth and the limited reduction of expense rate. The company intends to pay a cash dividend of 1 yuan (including tax) to shareholders for every 10 shares, with a dividend rate of about 327%. 1Q20 performance: the income increased by 10%, and the return net profit increased by 12.9%. Under the background of the epidemic, the income and profit side accelerated growth, so it was better than we expected.
Trend of development
In 2019, the performance stabilized and the e-commerce channel accelerated. The company achieved steady revenue growth in 2019, and store revenue reached 3.25 billion yuan, which was basically the same as the same period last year. The revenue of direct operation / franchise stores was-1% Universe 9% to 30.619 billion yuan respectively, and the number of direct operation / franchise stores was + 2% Universe 15% to 2429pm 263, respectively. The scale expanded steadily. E-commerce revenue increased by 25% to 520 million yuan, showing accelerated growth. We believe that we benefit from key pastry, puffing, meat and other categories as well as accurate marketing strategies; special channel revenue also increased by 18% to 180 million yuan, achieving rapid growth. The profit performance in 2019 is more stable than that in 2017-18. The company said that it pays attention to intelligent management to improve efficiency in 2019. We believe that the main reason is the gradual improvement of the layout of system construction and talent reserve in the early stage of the company, and the reduction of marginal investment leads to a decline in expense rate compared with the same period last year. The company's sales / management expense rates in 2019 are respectively year-on-year-0.26/-0.57ppt to 32.6% and 10.5%. We expect the downward trend in expense rates to continue this year.
1Q20's performance exceeded expectations and is expected to accelerate growth in 2020. The company's 1Q20 revenue and profits have achieved double-digit accelerated growth, achieving rapid and steady growth in the context of the epidemic, exceeding our expectations. According to our grassroots research, most of the company's stores are in normal operation during the Spring Festival and the epidemic, and we judge that despite the reduction in offline passenger flow, the stores may benefit from the company's online APP, takeout, home-to-home business, community group shopping and other ways to drive the same store revenue growth, and lead to simultaneous profit growth. Looking forward to this year, the company said that 2020 is the year of full sales, and we will vigorously develop the South China market on the basis of intensive cultivation of mature markets such as Shanghai and Jiangsu, and we expect the company's stores, e-commerce and special channels to achieve accelerated growth. we expect that under the assumption of accelerated income growth and downward expense rate, profit is also expected to accelerate growth, and the level of net interest rate is expected to recover gradually.
Profit forecast and valuation
For the time being, the EPS forecast for 2020 is maintained at 0.34 yuan, and the EPS forecast for 2021 is introduced at RMB 0.46. Due to the unstable level of the company's net interest rate, the Pmax E valuation method can not reflect the true value of the company. We use Pmax S, and the current price corresponds to only 0.9 and 0.7 times Pmax S in 2021. Considering the central level of industry valuation and the basic orientation of the company, we will give 1.1 times Pmax S in 2020, and raise the target price by 14% to 16 yuan. There is room to rise by 18% and maintain a neutral rating for the time being.
Risk.
Industry competition intensifies, regional expansion risk, franchisee management risk, food safety incident