Event: the company released 21H1 semi-annual report. The company realized operating income of HK $324 million, a decrease of 0.09%, a gross profit of HK $128 million, a decrease of 7.82%, and a net profit of HK $24 million, a decrease of 9.27%.
Revenue side: the company achieved operating income of HK $324 million, up or down 0.09%, mainly due to the continuous retrogression of the sold medical anti-aging business and the new month sub-center is still in a climbing period, the revenue still can not cover the cost. According to the type of business, the revenue of ① monthly service business reached HK $315 million, an increase of 2.67%, and the net profit reached HK $44 million, a decrease of 8.22%. This is mainly due to the loss of Qiaocheng Light and luxury Institute during the climbing period. As the monthly sub-center industry is generally booked 3-6 months in advance, the occupancy rate of the new store gradually increases after opening, and the monthly profit and loss balance is achieved half a year after the store is opened. Investment in ② medical anti-aging and health industries achieved operating income of HK $5 million, a decrease of 18.49 per cent.
Gross profit margin: the gross profit margin of 2021H1 is 39.57%, minus 3.32pct, and the gross profit margin of monthly sub-service business is 37.30%, which is also minus 2.80pct. Consistent with the factors affecting revenue, mainly due to the continued retrogression of the sold medical anti-aging business and the new month sub-center is still in a climbing period, revenue still fails to cover costs.
Cost side: the company's expense rate during the first half of 2021 is 38.34%, with an increase of 4.63pct. Among them, ① administrative expenses: the company's 2021H1 administrative expenses were HK $28 million, with an increase of 11.63%; the administrative expenses rate was 8.78%, with an increase of 0.91pct, mainly from the business of the health industry. ② sales and distribution fees: the company's 2021H1 sales and distribution fees were HK $63 million, an increase of 23.00%, and the sales and distribution fee rate was 19.41%. The increase in 3.63pct was mainly due to the additional fees incurred by operating the Crescent Center. The financial cost of ③ was HK $33 million, an increase of 0.6%. Due to the financing to repay debt in the first half of the year, debt will decline in the second half of the year.
Profit side: the profit during the period when the company's 2021H1 belongs to the owner of the company is HK $24 million, with a decrease of 9.27%; the net interest rate is 7.27%, which is the same as minus 0.74pct, which is mainly due to the reduction of gross profit caused by the continuous retrogression of ① medical anti-aging business; the opening of a crescent sub-center by ② brings additional expenses for its main business costs, sales and distribution expenses. The proceeds from the sale of subsidiaries and associates are offset by some of the above additional fees.
The company's expansion is active, and the standardization system helps the company to continue to expand. As of 2021H1, the total number of rooms in the monthly sub-center reached 505, a net increase of 70 compared with 2020. On July 29, 2021, the company leased a property located in Nanshan District of Shenzhen City for the new "Aidi Palace" brand Yuezi Center, with 94 rooms available, which is expected to be officially opened in September 2021; in Chengdu, 26 rooms are expected to be available for service, and the company is expected to officially open in October 2021, when the total number of rooms of the company will reach 625. As a leader, the company has built a wide moat in terms of brand, standardization, scale and other aspects: over the past 14 years, more than 20 stars, including Huang Lei and his wife, have moved in, and the star effect has further accelerated the flywheel effect of brand marketing. the company has formed modularization and standardization in all aspects from recruitment to standardization, and is actively participating in the formulation of industry standards to further ensure high standards and high quality of service. The chain operation ability is gradually verified, and the ultra-light asset expansion model contributes to the growth.
Investment suggestion: in 2021, the Group opened the ultra-light asset model to open the "Emperor Palace" brand monthly center, greatly shortening the opening cycle of new stores and capital investment. The operation and orders of Shenzhen overseas Chinese City Light and luxury Institute under the first ultra-light asset mode basically confirm the success of this model. The Group sells non-core businesses to further focus on the development of Yuezi services business.
In the future, under the favorable background of the three-child policy and supporting measures, the group will speed up the pace of opening stores. It is estimated that the company will make a net profit of 0.85 billion RMB in 21-22 years, which is calculated as HK $1.0 / 210 million at the exchange rate of 1.20, and the corresponding PE is 44x/22x. Maintain a "buy" rating.
Risk tips: the opening of new stores is not as expected, the landing effect of the three-child policy is not as expected, the operation is not as expected, the development of the industry is not as expected, health housing sales are not as expected, cross-market valuation risk