occurrences
The company released its 2022 interim report, achieving revenue of 960 million yuan, a year-on-year decrease of 14.20%; achieving net profit of 145 million yuan, a year-on-year decrease of 37.15%; net profit of Fumo after deduction was 135 million yuan, a year-on-year decrease of 30.92%.
The epidemic is repeated, and operations are under pressure
In terms of revenue: 2022H1's retail business achieved revenue of 808 million yuan, a year-on-year decrease of 14.80%, accounting for 84.19% of its main business (-0.59pct). The decline in revenue from the main retail business was mainly due to (1) the recurrence of the epidemic in the Yangtze River Delta region, which blocked the movement of people and logistics between regions and the decline in passenger flow; (2) the company responded to government requests and 2022H1 reduced rent by about 18.67 million yuan.
Gross and net interest rate: The gross margin of 2022H1 company was 79.52%, down 1.42 pct from the previous year, mainly due to relatively rigid costs; the net interest rate was 27.66%, down 6.75 pct from the previous year, mainly due to the increase in sales expenses and management expenses due to the adjustment of employee remuneration structures, the increase in energy costs, and the confirmation of restricted stock expenses. The 2022H1 sales expense ratio is 18.59% (+1.57 pct) and the management expenses rate is 18.06% (+4.04pct).
The launch of a new round of restructuring is expected to improve operating performance
(1) Hangzhou Tower: In 2022, the Hangzhou Tower began a new round of three-year restructuring. On the one hand, it actively promoted investment promotion for target brands and focused on building the ceiling of the jewelry sector brand lineup. Investment negotiations for brands such as Harry Winston have progressed substantially; on the other hand, they built VIC ROOM, the fourth floor of the new B block. (2) Jiebai Commercial Branch: Gather resources within the group to supplement investment opportunities, and at the same time actively engage with target brands to enrich development reserves.
Accelerate the cultivation of emerging sectors to create new growth poles
In order to meet the diverse needs of customers, the company laid out the full medical, Yuesheng Sports, and online agent operator Baiqiu Network to collaborate with the main business to create a “retail+service ecosystem”. (1) Whole-course medical treatment: With the characteristics of high-end membership-based health services, Wholecheng Medical effectively undertakes overseas medical examinations and the return dividends of medical demand. 2022H1 was affected by the epidemic, passenger traffic declined slightly, and 2022H1 achieved revenue of 40,129,500 yuan (-2.28%). (2) Yuesheng Sports: 2022H1 Yuesheng Sports lost 1,7587 million yuan. It is still in the nurturing period. 2022H1 opened 2 new self-operated stadiums and cooperated with New Oriental on 3 fitness stadiums. (3) Baiqiu Network: Baiqiu Network initially focused on the agency operation of luxury goods and high-end fashion categories, continuously improving global digital retail service capabilities. 2022H1 is once again ranked as a six-star service provider on Tmall.
Investment advice
The short-term epidemic catalyzed and the return of domestic luxury consumption drove the growth of Hangzhou Tower's performance. Looking at the medium to long term, the company has entered a new round of regulation, combined with consumption upgrades, and the main retail business is expected to achieve steady growth. In terms of multi-business development, the company lays out the healthcare industry and sports industry to meet the diverse needs of consumers, increase customer stickiness, and collaborate with the main business. We expect the company's EPS from 2022 to 2024 to be 0.53, 0.69, and 0.79 yuan/share, respectively. Corresponding to the current stock price PE is 12, 9, and 8 times, respectively, to maintain the “buy” rating.
Risk warning
Consumption upgrades fell short of expectations; the impact of the epidemic faded, outbound travel was liberalized, and some backflow demand flowed out again; market competition intensified, and revenue growth fell short of expectations.