1H20 performance is basically in line with our expectations.
Recently, we attended the management exchange meeting of the company's 1H20 performance. The company's first-half income was 14.037 billion yuan, + 4.07% compared with the same period last year; the net profit returned to the mother was 58 million yuan, + 32.67% compared with the same period last year, corresponding to a profit of 0.05 yuan per share. In the first half of the year, the company actively adjusts the category structure, optimizes the network layout, realizes the double growth of revenue and profit, and pays attention to the effect of format transformation and upgrading in the follow-up.
Trend of development
1. Revenue in the first half of the year was + 4.07% compared with the same period last year, of which same-store sales increased by about 1.23%, mainly due to the company's timely adjustment of core commodity items during the epidemic to ensure the supply of livelihood goods, and effectively attracted passenger flow on the basis of good price control. 1) large comprehensive supermarket: revenue reached 8.017 billion yuan, year-on-year + 2.1%, same store decreased 1.74%. In the first half of the year, based on the iteration of 3.0PLUS model and 2.0 model, the company created a multi-scene customer experience, accelerated the construction of digital store system, and improved online management ability. 2) supermarkets: revenue reached 5.036 billion yuan, + 10.6% compared with the same period last year, and the same store increased by 9.02%. The company carried out business transformation and upgrading by optimizing category structure, improving supply chain capacity, expanding fresh business area and other measures; 3) convenience stores: revenue reached 788 million yuan,-16.5% year-on-year, down 12.78%, mainly due to streamlining personnel and closing some outlets during the epidemic. In terms of exhibition stores, the company continued to optimize the layout of stores and improve the quality of the overall network. In the first half of the year, there was a net increase of one large-scale comprehensive supermarket store; a net increase of 45 supermarket outlets, including a net increase of 11 direct stores and a net increase of 34 franchise stores; a net decrease of 58 convenience store outlets.
2. The cost control measures are effective and the profitability has been improved. Gross profit margin rose 0.91ppt to 14.42% year-on-year, mainly because the company actively adjusted category structure during the epidemic and optimized on-site operations in stores to reduce wear and tear. From the expense point of view, the rate of sales expenses decreased to 16.83% compared with the same period last year; the rate of management expenses decreased by 0.12ppt to 2.96% compared with the same period last year; and other operating expenses increased by 2633.9% year-on-year, mainly due to the provision loss of the network to be closed in the first half of the year. The net interest rate for the first half of the year was + 0.09ppt to 0.42% compared with the same period last year.
3. Follow up and pay attention to the optimization and upgrading effect of the company's business format. 1) accelerated store transformation: the company plans to vigorously promote the transformation and upgrading of version 2.0 of large-scale comprehensive supermarkets, with the guidance of reducing losses and increasing profits, and improve the overall flat efficiency. The company expects to upgrade 50 standard supermarkets by the end of the year. And create a new retail model based on community service in the last kilometer, and realize the upgrading transformation from traditional hypermarkets to community commercial centers. 2) Category and supply chain: the company plans to introduce high-quality, differentiated products, lead the optimization of commodity structure and configuration, optimize the fresh direct mining base and strengthen the joint mining supply chain, to achieve the rapid promotion of fresh business; 3) own brand: the company will enhance the sales share of its own brand through supply chain optimization, brand building, regional linkage and marketing strengthening.
Profit forecast and valuation
Taking into account the intensification of competition in the industry and the uncertainty faced by the company's transformation and upgrading, we reduce the net loss of homing by 112 million yuan to 127 million yuan in 2020, and introduce a net loss of 90 million yuan in 2021. The current stock price corresponds to 0.06 times of 2020 picks in 2021, maintaining an outperforming industry rating and lowering the target price by 8 percent to 1.75 Hong Kong dollars due to intensified competition in the industry. Corresponding to 2020, 2021, 0.07, 0.07, 0.07, and 0.07 times Pmax S, which is 21% higher than the current stock price.
Risk.
The competition in the industry intensifies; the effect of format adjustment and upgrading is not as good as expected.