The performance is in line with our expectations
Hefei Department Store announced its results for the first half of 2020: revenue was 4.91 billion yuan, down 17.66% from the same period last year; net profit from home was 96 million yuan, down 29.58% from the same period last year, which was basically in line with our expectations, corresponding to 0.12 yuan per share; net profit from non-return was 60 million yuan, down 42.63% from the same period last year. Non-recurrent profit and loss mainly came from government subsidies and the income of its financial assets. On a quarterly basis, Q1/Q2 revenue is-25.72% and net profit is-50.24% and 119.76%, respectively, compared with the same period last year. Affected by the epidemic, Q1 revenue and profits fell sharply at the same time. With the effective prevention and control of the epidemic and the acceleration of resumption of production, the performance of Q2 has improved compared with Q1.
Trend of development
1. 1H20's revenue decreased by 17.66% compared with the same period last year, which was significantly affected by the epidemic: 1) Department store (including home appliances): the income realized was 2.522 billion yuan, down 27.33% from the same period last year. Affected by the epidemic, the income of the department store and home appliances gradually picked up after returning to work in March, and the decline gradually narrowed. 2) supermarket industry: realized income of 2.162 billion yuan, up 8.57% over the same period last year, thanks to its cooperation with online platform to develop home business; 3) agricultural product trading market: realized income of 165 million yuan, up 5.37% from the same period last year. Business growth is relatively stable; 4) real estate sales business: realized income of 62 million yuan, down 82.08% from the same period last year, limited by the epidemic, the housing market transaction is low.
2. The reduction of cost and control fee still needs to be strengthened. 1H20's gross profit margin fell 0.91ppt to 19.38% compared with the same period last year, mainly due to the depressed housing market transactions during the epidemic and the sharp decline in high-margin real estate sales. From the expense point of view, the sales expense rate increased to 4.90% year-on-year, mainly because the company actively carried out promotional activities to cooperate with the government to promote consumption, the management expense rate increased 0.80ppt to 9.71% year-on-year, and the financial expense rate increased to 0.47% year-on-year, mainly due to the increase in interest expenses. Under the comprehensive influence of the epidemic, the company's final net interest rate decreased by 0.33ppt to 1.96% compared with the same period last year, and the net interest rate after deducting non-profit decreased by 0.54ppt to 1.23% compared with the same period last year.
3. The performance of offline physical retail is under pressure in the first half of the year, and the company actively promotes the transformation of business format and operation reform. The department store industry actively optimizes the strategic layout, closes loss-making stores, while exploring new retail models such as live broadcast and bringing goods; the supermarket industry actively develops its home business and cooperates with the mainstream online platform; the agricultural industry actively promotes the layout of light assets and plans cold chain logistics projects. Follow up and continue to follow up the effectiveness of the company's reform.
Profit forecast and valuation
For the time being, the company maintains its earnings forecast of 0.17 per share of 0.20 yuan per share in 2021, while the current share price corresponds to 31 times earnings per share of 2020 prime in 2021. Maintain the rating of the outperforming industry, considering that the company is actively optimizing its business strategy to promote the transformation of its business format, raising the target price by 16% to 6.34 yuan, corresponding to 2020 Universe, which is 32 times Pmax E in 2021, which is 5% higher than the current stock price.
Risk.
The competition in the industry continues to intensify; the format transformation is not as expected.