The results for fiscal year 2021 were slightly lower than we expected.
Gao Xin Retail adjusted the fiscal year balance date from December 31 to March 31, and announced its results for the 15 months ended March 31, 2021: realized income of 124.334 billion yuan, year-on-year-2.0%, and return to its mother net profit of 3.572 billion yuan,-15.4% year on year. 1Q2021, the company achieved an income of 28.848 billion yuan,-8.5% year-on-year, and a net profit of 700 million yuan,-49.6% year-on-year. The company's short-term performance was under pressure, slightly lower than we expected, mainly due to the high base of last year's epidemic and the increase of new business type investment by the superimposed company. The company adjusts the fiscal year balance date to match the financial year of BABA, the controlling shareholder. We believe that the cooperation between the two sides will continue to strengthen in the future, and we are optimistic about the company's new retail business prospects and medium-and long-term growth space.
Trend of development
1. The income of 1Q21 merchandise sales has declined, the arrival business has developed well, and the rental income has rebounded. 1) merchandise sales: revenue for the 15 months ended March 31, 2021 and during the 1Q21 period were-1.7% and 9.1% respectively compared with the same period last year. In the 15 months to March 31, 2021, the same store was-1.8% year-on-year, mainly due to the impact of the epidemic and increased competition in the industry. The arrival business is developing well, with the average daily volume of 1Q2021 reaching business stores approaching 1100 per hour, an increase of more than 40% over the same period in 2010. the unit price of customers is 68 yuan, an increase of about 6% over the same period in 2019. 2) Rent income: during the 15 months ended March 31, 2021 and during the 1Q21 period, the income was-9.1% and 14.7% respectively compared with the same period last year. The high growth of Q1 was mainly due to the low base impact of rent reduction on tenants during the epidemic last year.
2. Increase new business type's investment and put pressure on the profit end. During the 15 months ended March 31, 2021 and during the 1Q21 period, the gross profit margin was-1.0ppt/+0.4ppt to 25.0% and 23.4% respectively compared with the same period last year, with the increase in Q1 mainly due to the rebound in rental income. From the cost point of view, the sales expense rate is from + 0.3ppt/+2.3ppt to 19.5% to 17.6%, and the management expense rate is from-0.2ppt/+0.4ppt to 2.6% to 2.5%, respectively. The increase in the Q1 fee rate is mainly due to the company's increased investment by new business type. Under the combined effect, during the 15 months ended March 31, 2021 and during the 1Q21 period, the net interest rate was-0.5ppt/-2.0ppt to 2.9% and 2.4% compared with the same period last year.
3. Deeply bound with BABA, optimistic about the medium-and long-term development prospects of the company's new retail business. On the one hand, thanks to BABA's support in traffic introduction, logistics services and other aspects, the company's home-to-home business has a good momentum of development, on the other hand, the company relies on high-quality supply chain capabilities, cooperation with BABA in Maochao sharing inventory, community group buying business and other aspects is progressing smoothly. We believe that the two sides are expected to further deepen online and offline cooperation in the future, and are optimistic about the increasing market share of the company with the support of BABA in the medium and long term. In the first year of new business type's investment in 2021, new business type, such as small and medium-sized Runfa and community group buying, is expected to usher in its force. in addition, the company continues to promote the reconstruction of hypermarkets, which is expected to increase the number of customers and improve the efficiency of stores. By the end of 1Q21, 38 hypermarkets have been renovated, and 40-50 are planned to be promoted annually in the future.
Profit forecast and valuation
Taking into account the impact of the company's fiscal year adjustment date, we expect net profit for fiscal years 2022 and 2023 to be 1.65 billion yuan and 2.01 billion yuan respectively, corresponding to 34 and 28 times for Pmax E, respectively. Maintain the outperform industry rating, and given the pressure on the company's short-term performance, we cut our target by 5% to HK $8.6, corresponding to 44 times Pmax E in fiscal year 2022, with 25% upside room.
Risk
Industry competition intensifies; online-to-home growth falls short of expectations; investment in new business exceeds expectations.