The results in the first half of fiscal year 2021 were better than we expected.
China trend announces results for the first half of fiscal year 2021: revenue of 899 million yuan, unchanged from the same period last year The net profit was 1.116 billion yuan, an increase of 493% over the same period last year, and the performance was better than we expected, mainly because the growth of investment income exceeded expectations. The company plans to pay an interim dividend of 5.69 cents per share, corresponding to a dividend rate of 30%. Sales of the Chinese segment increased by 8.8% over the same period last year, accounting for 91% of the total revenue, of which offline and online channel sales increased by 11% and 23% respectively, and the corresponding income accounted for 74% and 14% respectively.
In the first half of fiscal year 2021, the company recorded low-single-digit and median growth in omni-channel sales and same-store sales respectively, both of which improved quarter-on-quarter after the outbreak. The total number of stores reached 1153, a net increase of 24 from the end of fiscal year 2020. Due to the partial relocation of the department store to the shopping center, the number of stores in the shopping mall decreased by 1% compared with the same period last year, accounting for 68% of the total number of stores. The number of stores in the shopping center increased by 11% year on year, accounting for 28% of the total number of stores. The company sold its Kappa Japan business for $13 million in July 2020 and decided to invest the Phenix brand to franchisees due to rising valuations of investment products. The company's investment income in the first half of fiscal year 2021 rose sharply from 166 million yuan to 1.261 billion yuan compared with the same period last year, and its core profit before interest and tax decreased by 94% to 5 million yuan. This is mainly due to the expansion of losses in the company's Japanese business as well as 54 million yuan in inventory provisions and 34 million yuan in other asset impairment brought about by the sale of the Japanese business. At the same time, the increase in retail discounts and the reduction of government subsidies have put pressure on the profitability of the company's Kappa China business. Trend of inventory days reduction from 25 days to 262 days
Sales rate, channel inventory and same-store sales growth are key performance indicators of China's trend.
Among them, the channel inventory level has been shortened to 8 months, and we believe that the 2021 fiscal year is expected to be further shortened. The company improves product awareness through supply chain reform, so as to improve the efficiency of single stores. In addition, the company invests in digitization to promote the omni-channel 020 model, take advantage of cloud warehouses and activate member assets.
Profit forecast and valuation
Taking into account the latest investment income, we raised our earnings per share forecasts for fiscal years 2021 and 2022 by 290% and 209% to 0.20 yuan and 0.21 yuan, respectively. The company's current share price corresponds to 4 times the price-to-earnings ratio for fiscal year 2021 and 3.9 times fiscal year 2022.
Maintain the outperform industry rating and raise the target price based on segment plus aggregate valuation by 18% to HK $1.19, which is 31% upside from the current share price. We value the clothing business at 10 times the 2022 fiscal year price-to-earnings ratio. In addition, we have given a 50% valuation discount to the company's multi-business model.
Risk.
Affected by the epidemic, the cost structure is under pressure during the transition period.
