Event: in 2019, the company achieved operating income of 438 million yuan, down 3.41% from the same period last year, and its net profit was 47 million yuan, an increase of 17.95 yuan over the same period last year, deducting 39 million yuan from non-parent net profit, an increase of 32.26% per share. In the first quarter of 2020, the company achieved operating income of 52 million yuan, down 43.06% from the same period last year, and its net profit was 749300 yuan, down 94.99% from the same period last year.
The channel reform, the baby clothing scale shrinks. With the rise of new channels such as mobile e-commerce and social e-commerce, offline business has been hit to a certain extent. The company has closed and transferred some stores whose hot spots have shifted and those with poor geographical location and low passenger flow. A total of 363 stores have been closed under the brands of "LABI BABY" and "I LOVEBABY", of which 281 have joined and 82 have been directly operated. Affected by this, the company's income from baby clothing was 109 million yuan in 2019, down 14.9% from the same period last year.
Management efficiency is improved and gross profit margin is improved. The company's headquarters will be streamlined and merged with multiple branches across the country, personnel and work processes will be optimized, and work efficiency will be significantly improved. At the same time, the introduction of POS system into the national direct operation system to strengthen the fine management of store business, so that the operational efficiency of terminal stores has been significantly improved. In 2019, the company's gross sales margin increased from 51.46% to 54.3%, an improvement that is more obvious.
Short-term performance was under pressure in the first quarter due to the impact of the epidemic. Affected by the epidemic, the consumer demand for maternal and infant products has decreased significantly, and the company's operating income and costs have dropped significantly. At the same time, the company has made more foreign donations in the first quarter, and its non-operating expenditure has increased by about 1.1 million yuan. We believe that the decline in performance is a short-term epidemic effect, and consumer demand has picked up somewhat since the second quarter, which is expected to make the performance return to the normal level.
Profit forecast: we predict that the net profit attributed to the parent company from 2020 to 2022 is 49 million yuan, 51 million yuan and 53 million yuan respectively, and the corresponding EPS is 0.14,0.14,0.15 yuan respectively. The current stock price corresponds to 36.6 PE 35.333.9 times. As a leading company of mother and child products in China, the company's endogenous growth has gradually stabilized, superimposed in recent years, the demand for mother and child products has increased, and the performance is worth looking forward to. Considering that the valuation level is not low, the company is given a "prudent recommendation" rating for the first time.
Risk tips: the risk of a decline in performance caused by the epidemic; the risk of a decline in the prosperity of the industry; the risk of rising prices of raw materials; systemic risks in the capital market.