The 2019 performance was lower than we expected.
The company's revenue in 2019 was 2.6 billion yuan, an increase of 12.8% over the same period last year, and the net profit was 85.39 million yuan, an increase of 1.2% over the same period last year, corresponding to 0.11 yuan per share. Revenue in the fourth quarter increased by 6.2%, with a net profit loss of 12.67 million yuan, compared with a loss of 11.43 million yuan in the same period last year. The performance is lower than we expected, mainly due to the decline of gross profit margin and the rapid growth of management and R & D expenses.
The company also announced 1Q20 results: revenue decreased by 34.6% to 360 million yuan, and net profit decreased by 46.6% to 30.57 million yuan, in line with our expectations.
Home textile industry wisdom shop accelerated sinking, washing and care services to achieve full coverage. 1) in terms of the main home textile business, the company actively uses the smart store model to sink third-and fourth-tier cities and key communities, and uses the "house of good goods" platform as the traffic entrance, combined with community, live broadcast and other emerging sales models to promote the development of new retail business. More than 1200 new stores were opened in 2019, including 949 smart shops. 2) in terms of household services, the layout of the company's washing and care terminals has been promoted rapidly in 2019, six high-end washing and care factories have been established by Seven Star Care, and Mengjie has become the standard configuration of brand collection stores and standard stores, and the washing and care service has achieved full coverage of all terminals.
Generous sleep increases profitability. Although affected by the adverse trade environment, generous sleep still achieved an income of 220 million yuan in 2019, an increase of 20% over the same period last year, and a net profit of 19.45 million yuan, an increase of 32% over the same period last year.
The improvement of working capital turnover led to a substantial increase in operating cash flow. Year-on-year gross margin in 2019-1.6ppt to 40.1%, sales expense rate decreased 2.4ppt year-on-year, management expense rate decreased 0.6ppt year-on-year, and R & D expense rate increased 2ppt to 3.3% year-on-year.
In terms of working capital, the turnover days of inventory, accounts receivable and accounts payable were-28,-5 and-1 respectively, promoting a substantial increase in operating cash flow by 186% to 560 million yuan.
Trend of development
In 2020, the company plans to accelerate the layout of smart retail, promote the rapid sinking of channels and care services, enhance the competitiveness of products, upgrade information systems, optimize the talent structure, and further improve the operational efficiency of the company.
Profit forecast and valuation
Taking into account the impact of the epidemic on store opening, the profit per share in 2020 Universe was reduced by 53% per share by 57% to 0.11 yuan per share, corresponding to a year-on-year decrease of 24% and an increase of 35%. The company's current share price corresponds to 51 times / 38 times 2020 pound E for 21 years. Maintain a neutral rating, taking into account the impact of the epidemic on an one-time basis, slightly reduce the target price by 3% to 4.56 yuan, corresponding to 54 times / 40 times 2020 PG E, with 6% upside space.
Risk
The risk of high inventory.