1H18 performance meets expectations
Youngor announced 1H18 results: operating income was 3.586 billion yuan, down 33.6% from the same period last year; net profit belonging to the parent company was 1.489 billion yuan, down 27.3% from the same period last year, corresponding to 0.42 yuan per share. The performance was in line with expectations, and the decline was caused by the carry-over cycle of real estate projects.
Clothing business revenue increased 13% to 2.82 billion yuan, accounting for 79% of total revenue, and net profit increased 36% to 606 million yuan. By channel, online revenue grew by 11%, accounting for 2.5% of clothing revenue. There are 2218 offline stores and 138net customs stores during the period, with a business area of 1% less than at the beginning of the year. Both closed stores and newly opened stores cover an area of about 115m2 and 257m2 respectively. Gross profit margin edged up 0.76ppt to 65.8 per cent year-on-year. Intelligent manufacturing and integration to the upper reaches of the industrial chain continue to advance.
Due to the decrease in carry-over projects, the income of the real estate business decreased by 73.7% to 760 million yuan, contributing 21% to the total income, and the net profit decreased by 71% to 130 million yuan. New construction of 280000 square meters was started during the reporting period. The pre-sale amount decreased by 3% to 5.31 billion yuan compared with the same period last year, and the pre-sale area decreased by 18% to 200000 square meters. At the end of the period, the land reserve area is 200000 square meters, concentrated in Ningbo.
Investment business income fell 3 per cent to 1.82 billion yuan. The income generated by the disposal of Pudong Development Bank, Ningbo Bank and CITIC Limited decreased compared with the previous period. At present, Youngor has invested a total of 29 billion yuan.
The increase in gross profit margin to 10.3ppt to 58.7% was mainly due to a decline in the proportion of income from real estate business with low gross margin; the rate of sales expenses increased by 10.4ppt to 27.1%, mainly due to a sharp decline in income; and the loss of asset impairment rose sharply to 300 million yuan (1H17:85 10,000 yuan), due to the provision for CITIC Limited's impairment. Cash flow from business activities fell 41.6 per cent year-on-year to 1.33 billion yuan, as expenditure on land acquisition and labor services increased by 780 million yuan in the real estate sector.
Trend of development
At the beginning of the year, it is expected that the 10% growth rate of the branded clothing business is expected to be achieved. The real estate business is expected to sell an area of 300000 square meters in the second half of the year.
Profit forecast
Keep the profit forecast for 2018 and 19 unchanged. It is estimated that the net profit per share in 2018 and 19 is 0.47 yuan and 0.52 yuan, an increase of 461.9% and 11.2% over the same period last year.
Valuation and suggestion
At present, the company's share price corresponds to 15 times / 14 times 2018 Placer 19 PPPease E. The neutral rating and target price is maintained at RMB8.120.The target price is given by apparel (12 times 2019), real estate (DCF) and investment (fair value) segments, with a 40 per cent discount on multiple valuations on a total basis; corresponding to 16 times 2019 overall PGreg E, implying 15 per cent upside space.
Risk
Uncertainty in the settlement of real estate and investment business income.