The performance in 2020 is lower than we expected.
Dashang Co., Ltd. announced its 2020 results: operating income was 8.117 billion yuan, down 62.9% from the same period last year; net profit from its mother was 499 million yuan, down 44.1% from the same period last year; and non-net profit was deducted from 500 million yuan, down 39.9% from the same period last year, which was lower than we expected. Year-on-year revenue of 2020Q1/Q2/Q3/Q4 is-68.2% Universe 63.9%, 59.5%, 58.5%, net profit is-86.0%, 8.7%, 20.1%, 2.7%, respectively, and non-net profit is-92.0%, 7.1%, 7.1%, 16.2%, respectively. The growth rate of non-net profit improved month-on-month in the fourth quarter.
Development trend
1. Revenue fell by 62.9%, mainly affected by the epidemic and changes in accounting standards. In terms of business format, revenue from department stores / supermarkets / home appliance chains is-82.7%, 29.5%, 64.0%, respectively, compared with the same period last year; from a regional point of view, Dalian, Daqing and Mudanjiang, which account for a large proportion of revenue, are respectively-51.2%, 55.0% and 63.9% from the same period last year. During the reporting period, the company deepened the structural adjustment and reform of stores, further adjusted the layout and optimized the allocation of resources, and the total number of stores opened at the end of the reporting period decreased by 9 to 128 compared with the same period last year.
2. The gross profit margin has increased and the net profit margin has improved. The year-on-year consolidated gross profit margin rose to 33.5% year-on-year, mainly because the company adjusted its revenue guidelines and took measures to eliminate negative gross profit marketing and close some loss-making stores. On the expense side, the sales expense rate increased by 6.3ppt to 12.5% compared with the same period last year; the management expense rate decreased by 3.6ppt to 8.3% compared with the same period last year, mainly due to the implementation of new income standards this year, such as rental fees, depreciation charges, intangible assets amortization, long-term prepaid expenses amortization expenses, property expenses and other contract performance costs classified to operating costs; the financial expense rate decreased slightly by 0.3 ppt compared with the same period last year. Under the combined influence, the company's net interest rate in 2020 increased by 2.1ppt to 6.2% compared with the same period last year, and the non-net interest rate increased by 2.4ppt to 6.2% compared with the same period last year.
3. Pay attention to the progress of the company's follow-up business adjustment measures. The company actively adjusts its business model and strengthens its management: 1) offline business: actively optimize the layout of offline stores, comply with the trend of consumption upgrading, and create a professional platform for physical commerce, "Dashang City Paradise". The goal is to build it into a modern and international landmark physical business complex. 2) online channels:
Relying on the physical store network and Tiangou.com technology platform, we will create a private ecology with shopping guides as the core, develop "oversold box" Mini Program, and use innovative sales models such as live streaming as offline channels to drain and empower. 3) Management efficiency: implement the digital reform plan, promote the overall digitization of commodity plate, supply chain plate, China Taiwan, etc., implement the manufacturer registration system to achieve large-scale operation, and stimulate the enthusiasm of employees through the policy of "joint marketing contracting and partnership entrepreneurship". The company's buyback plan is progressing smoothly, with a total of 110 million yuan of shares repurchased by 1Q21, accounting for 1.71% of the company's total share capital.
Profit forecast and valuation
In view of the intensified competition in the industry and the change in accounting standards, the company's earnings per share forecast for 2021 was lowered by 15% to 2.06 yuan, and the 2022 profit forecast per share was introduced. The current share price corresponds to a price-to-earnings ratio of 10x / 9x in 2022. Maintain an industry rating that outperforms. Taking into account the downward adjustment in earnings forecasts, the target price will be lowered by 15% to 24 yuan, corresponding to 12 times Pmax E in 2021 and 11 times Pmax E in 2022, with 14% room for increase.
Risk
Consumption continues to be weak; repeated risk of epidemic situation; intensified competition in the industry; risk of legal action.