The results in the first three quarters of 2020 are in line with our expectations
Hefei Department Store announced its results for the first three quarters of 2020: revenue was 7.233 billion yuan, down 13.72% from the same period last year; net profit from home was 127 million yuan, down 21.15% from the same period last year, corresponding to 0.16 yuan per share, which was basically in line with our expectations; net profit from non-return was 76 million yuan, down 31.13% from the same period last year. On a quarterly basis, 2020Q1/Q2/Q3 revenue is-25.72% and net profit is 5.94% and 4.03% respectively compared with the same period last year.
-50.24% Universe 119.76% Universe 26.98%; net profit deducted from non-return to home is-61.68% compared with the same period last year, respectively. The non-recurring profit and loss of Q3 in a single quarter mainly comes from investment income and government subsidies. As the economic activities enter the recovery stage after the effective control of the epidemic, the operating performance of Q3 has improved.
Trend of development
1. Revenue in the first three quarters decreased by 13.72% compared with the same period last year. Among them, the revenue growth rate of Q3 fell 4.03% from the same period last year, which was better than that of Q2. In terms of business, the combined revenue of department stores (including home appliances) and supermarkets accounts for more than 90%. We expect Q3 to continue to boost the supermarket sector, but the recovery foundation of department stores and home appliances sectors in the post-epidemic era is still weak, dragging down the growth of total revenue. We expect the agricultural products trading market and real estate sales sector, which account for less than 10% of the total, to improve slightly in Q3.
2. There is still room for reducing cost and increasing efficiency. The gross profit margin in the first three quarters fell 0.8ppt to 19.1% compared with the same period last year. We expect it to be mainly affected by the decline in high-margin real estate business during the epidemic in the first half of the year. As the Q3 housing market gradually picks up, the single-quarter gross profit margin fell to 18.5% year-on-year, narrowing the decline in the first half of the year. On the expense side, the sales expense rate in the first three quarters increased to 4.9% compared with the same period last year, the management and R & D expense rate increased to 10.1% year-on-year, and the financial expense rate increased to 0.4% year-on-year, mainly due to the increase in interest expenses. In the end, net profit margin in the first three quarters fell 0.2ppt to 1.7% year-on-year, and net profit margin after deduction fell 0.3ppt to 1.0% year-on-year.
3. Speed up business transformation and innovation, and there is room for subsequent quality improvement and efficiency improvement. Department stores and home appliances plate further adjust the strategic and optimized layout, close long-term loss stores, concentrate resources to help sustainable development; supermarket plate actively promote network layout and project cooperation to expand the scope of business; agricultural products plate accelerate the landing of cold chain logistics projects, continue to optimize the layout of light assets, and actively explore the new model of "agriculture plus super". Follow up the improvement of the company's operation continuously.
Profit forecast and valuation
The company maintains the company's earnings forecast of 0.17 per share in 2021 and 0.20 yuan per share, and the current share price corresponds to the price-to-earnings ratio of 30 in 2021. Maintain an outperform industry rating and target price of 6.34 yuan, corresponding to a price-to-earnings ratio of 37 times earnings in 2020 and 2021, which is 21% higher than the current stock price.
Risk.
The industry competition intensifies and the transformation risk, the real estate regulation tightens.