Main points of investment:
The Great Oriental released its 2017 annual report on April 18. In 2017, the operating income was 9.17 billion yuan, up 1.08 percent over the same period last year; the total profit was 352 million yuan, up 22.84 percent over the same period last year; and the attributable net profit was 261 million yuan, up 28.00 percent over the same period last year, deducting 249 million yuan from non-net profit, an increase of 43.97 percent over the same period last year. The diluted EPS is 0.46 yuan, and the return on net assets is 9.12%.
During the reporting period, the operating cash flow per share is 0.41 yuan, which is 0.89 times the earnings per share.
Distribution plan for 2017: it is proposed that 567 million of the total share capital will be used as the base, and 1.50 yuan (including tax) will be distributed for every 10 shares.
Brief comments and investment suggestions
1. The annual income in 2017 increased by 1.08%, and the gross profit margin increased by 0.52 percentage points. In 2017, the company achieved operating income of 9.17 billion yuan, an increase of 1.08% over the same period last year, and the comprehensive gross profit margin increased by 0.52% year-on-year to 12.63%. Sub-format:
(1) the retail revenue of department stores increased by 0.22% to 2.126 billion yuan over the same period last year, and the gross profit margin slightly decreased by 0.12% to 17.51%, of which proprietary income increased by 2.51% to 463 million yuan, while joint venture income decreased by 0.40% to 1.66 billion yuan. (2) the revenue from automobile sales and services increased by 1.23% to 6.555 billion yuan, and the gross profit margin increased by 0.51% to 6.57%. Among them, the revenue from automobile sales increased by 0.55% to 5.908 billion yuan, accounting for 90.2% of the revenue from the automobile business, and the gross profit margin increased by 0.41% to 2.82%. The revenue from automobile maintenance and training services increased by 6.96% to 642 million yuan, with a gross profit margin as high as 41.52%.
(3) the income from food and catering was 204 million yuan, down 1.50% from the same period last year, and the gross profit margin increased by 1.05% to 45.35%, of which the income from cooked food and catering decreased by 5.57% and 3.39% respectively, and the income from packaged food increased by 3.82%. Mainly due to the expansion of new channels such as wholesale and the sales of e-commerce platforms.
two。 Stores in Wuxi as the center of radiation around, own property accounted for 79%. At present, the company has a total of 114 stores, including 58 self-owned properties with a construction area of 3755 million square meters and 56 leased properties with a construction area of 9.88 million square meters. Among them, (1) Department store retail takes "Great Oriental Department Store" as the core, and has 2 department stores, 4 matching "Oriental Home Appliances" chain stores and 6 "General Industry supermarkets" chain stores. (2) the automobile plate is formed with the "Oriental Automobile City", which covers an area of 500 mu in Wuxi, as the core and has a total of 48 automobile 4S stores, 14 automobile maintenance service stores, 3 automobile comprehensive maintenance centers and 7 other automobile stores in nearly 10 cities in Jiangsu Province. (3) Food and catering, four new cooked food stores and three food and beverage stores were added in 2014, namely, "Sanfeng Hotel", "Dapai stalls" and "Guest Room".
3. During the period, the expense rate decreased slightly by 0.07 percentage points to 8.82%. In 2017, the company's sales expense rate increased by 0.22 percent to 3.90 percent compared with the same period last year, mainly due to the increase in the salary of employees caused by rising labor costs; the management expense rate decreased by 0.20 percent to 4.63 percent year-on-year, mainly due to the reduction of depreciation and amortization expenses; financial expenses decreased by 8.08 million yuan to 26.21 million yuan. The final period expense rate decreased by 0.07 percentage points to 8.82%.
4. The double increase in revenue and gross profit led to a 26.36 per cent increase in operating profit to 341 million yuan. The effective tax rate decreased by 4.56 percentage points, the profit and loss of minority shareholders increased by 6.27 million to 9.67 million yuan, the final net profit increased by 28% to 261 million yuan, and the non-net profit increased by 43.97% to 249 million yuan.
5. While preserving the stock business is rising steadily, at the same time, we should strengthen the development of the transformational business:
(1) inventory business: (a) Department Store Division: in terms of ① category optimization, increase the number of high-end cosmetics and beauty brands, introduce high-end watch brands such as Wanguo and Jaeger, and increase leisure brands; in terms of ② member management, implement hierarchical management, innovate "one-to-one" services for VIP customers on the basis of GSP, etc. In the aspect of ③ marketing, we will develop different industry alliances to enhance the ability of precision marketing, and at the same time, taking advantage of the opportunity that the South Plaza of the central store will be put into use again after the subway construction has been closed for many years, the above ground part will be built into various theme activities, and the underground part will be built into the trend of connecting the subway and the light food brand street.
(B) Automotive Division: in terms of ① 4S store business, it formulates the strategy of "keeping the price and ensuring profit", continuously optimizes the sales structure, and strictly controls vehicle inventory and structure management; in the aspect of ② after-sales business, it extends the connotation of after-sales service through after-sales technology forward, special after-sales product marketing, and through the implementation of "maintenance two-track system", as well as according to the characteristics of "low-frequency" and "high-frequency" after-sales service. ③ used car business, orderly promotion (to B to C) closed market platform project construction, in which merchant points system, ERP management system, inventory financing risk control system and other system construction has initially matched the needs of business operation.
(C) Food and catering: ① launched a variety of banquet products, such as green banquet, old flavor banquet, classmate banquet, etc., and launched Sanfengqiao "Ten Gold dishes" and "Ten Classic dishes" around "Jiangnan Taste" to strengthen the management of the brand; ② explored new businesses, promoted the "Family Nutrition Kitchen Plan", developed semi-finished nutrition packages and family dinner series, and delivered them to households. ③ cooked food business, add "bad, halogen" and other products, enrich the product line, while introducing high-popularity "network celebrity" products.
(2) Business expansion: (a) "Golden wrench" project: the holding subsidiary Golden Wrench is committed to providing flexible and low-cost information transportation tools for automobile service ecology, relying on the Internet to provide customers with intelligent SaaS platform system, and promoting business integration. On the premise of no significant increase in input cost, the number of stores developed by "Golden Wrench" platform has increased from 169to 2338, and the number of online vehicles has increased from 52000 to 468000. The number of work orders exceeds 240,000, and the amount of work orders "running water" amounts to more than 2300 million yuan.
(B) the "Qianji change" project: Oriental easy Valley independently develops a universal member value-added marketing service platform, "Qianji change", which provides a variety of points value-added services and living consumption guides, and provides a complete set of member value-added marketing management system for merchants. Since its launch, the number of registered users has grown to 100000, with more than 100,000 orders, more than 2 million points exchanged, more than 2 million points paid and more than 3 million paid in cash.
Maintain judgment of the company. ① has formed a business pattern of department store + automobile sales service + food "one body and two wings". The private mechanism is excellent: the department store business has an obvious competitive advantage in Wuxi, which is the cornerstone of the company's profit and cash flow; automobile sales and service business has formed a complete industrial chain layout from 4S stores (48), automotive supplies, automobile beauty to the used car market, with the market taking the lead and stable, expanding O2O and post-service business. The food business has a long-established "Sanfengqiao" brand and has formed a strong store network in Wuxi. ② equity investment is of great value and continues to contribute to investment income. The increase in the holdings of ③ major shareholders shows confidence. The Building Group plans to increase its holdings by 0.5% per cent in six months from 2017-11-21, accounting for 0.57 per cent of 3.26 million shares as of 2018-3-16, and currently holds 43.06 per cent.
Earnings forecasts and valuations. It is estimated that the EPS for 2018-2020 will be 0.52,0.59,0.68 yuan respectively, an increase of 12%, 13% and 15% respectively over the same period last year. The share price of PE for 2018-2020 is 13.3,11.8 and 10.2 times respectively. Considering the company's superior private mechanism, strong regional position, and the medium-and long-term development space of the automobile aftermarket, the main business in 2018 is given 0.43 yuan 18 times PE, investment income 0.09 yuan 0-5 times PE, corresponding to the target price range of 7.72-8.16 yuan, maintaining the investment rating of "increasing holdings".
Risk hints: sales growth in the automotive industry continues to slow; weak consumption is a drag on demand in the department store; O2O transformation in the automotive and food businesses is not as fast as expected; investment income (mainly from equity gains in two Porsche 4S stores) contributed less than expected to performance.
