Summary of events: the company released its 2017 mid-year report on August 29th. During the reporting period, the company realized operating income of 5.399 billion yuan, down 37.70% from the same period last year, and realized net profit of 2.047 billion yuan belonging to shareholders of listed companies, down 33.33% from the same period last year. Basic earnings per share was 0.57 yuan per share, down 39.36 percent from the same period last year.

The clothing business is growing steadily, and the main brands and sub-brands are making concerted efforts. The clothing sector achieved an operating income of 2.45 billion yuan, an increase of 10.67% over the same period last year, and a net profit of 446 million yuan, an increase of 12.96% over the same period last year. Of this total, the revenue of the main brand Youngor reached 2.044 billion yuan, an increase of 8.85% over the same period, while sub-brands MAYOR and Hart Schaffner Marx achieved a total operating income of 35100 yuan, accounting for 3.74% of sales over the same period last year to 14.66%. Driven by the explosive growth of MAYOR, the growth rate increased significantly by 43.88 PCT to 52.54% over the same period last year.

The big store marketing promotes the efficiency, and the effect of removing inventory is remarkable. Youngor simultaneously promotes the channel strategy of "opening big stores, expanding halls, closing small stores, and excellent structure". By the end of the reporting period, there were a total of 2469 marketing outlets, 85 fewer than at the beginning of the year, with a business area of 390200 square meters, an increase of 8690 square meters over the beginning of the year, and sales per household in all channels increased to varying degrees. The sales revenue of self-operated outlets, shopping center outlets and shopping mall outlets increased by 10.59%, 11.90% and 14.33% respectively over the same period last year. The book value of Youngor brand clothing inventory is 1.186 billion yuan, a decrease of 238 million yuan compared with the beginning of the year, and the inventory removal rate reached 16.72%.

The decline in the performance of the real estate business and investment business is a drag on the company's overall revenue and net profit. The revenue of the real estate business reached 2.903 billion yuan, an increase of 54.24% over the same period last year, and the net profit was 456 million yuan, down 60.97% from the same period last year. The investment business achieved an investment income of 18800 yuan, a decrease of 491 million yuan over the same period last year.

We estimate that the EPS of the company from 2017 to 2019 is 1.15,1.21 and 1.27 yuan respectively, corresponding to 9 times, 8 times and 8 times of PE respectively, covering the "overweight" rating for the first time.

Risk tips: weak terminal consumption; inventory risk.