The 1H19 performance is in line with our expectations
Beijing Jingkelong announced 1H19 results: revenue of 5.885 billion yuan, up 2.8% year on year; Guimu's net profit was 30,134 million yuan, up 3.8% year on year, corresponding to a profit of 0.07 yuan per share, in line with our expectations. On a quarterly basis, 2019 Q1/Q2 revenue was -2.9%/+11.1% year over year, and net profit was -2.5%/+52.4% year over year. Q2 The growth of the wholesale business accelerated.
Development trends
1. The same store was -5% in the first half of the year, and the wholesale business accelerated. Revenue in the first half of the year increased 2.8% year on year. By sector: 1) Retail business: Revenue fell 5.9% year on year, mainly due to the 5.03% decline in same-store sales and store closures in the first half of the year. Among them, the revenue of integrated supermarkets was -6.4% yoy, hypermarkets -4.9% yoy, and convenience stores -3.9% yoy. In terms of showrooms, in the first half of the year, the company opened 3 new convenience stores, closed 1 department store, 1 integrated supermarket and 6 convenience stores. As of the end of June 2019, the total number of company stores was 200; 2) Wholesale business: revenue increased 11.3% year-on-year, mainly benefiting from increased sales of new customers in small and medium-sized supermarkets and customers in remote suburban counties, the recovery in alcohol business sales, and new agency brands and overseas brand sales contributions.
2. The net profit margin remained flat at 0.5% year on year. The consolidated gross margin in the first half of the year fell 0.5ppt to 22.6% year on year. Among them, the gross margin of the main business increased 0.2ppt to 14.6% year on year, mainly benefiting from product structure and supply chain optimization, which led to a year-on-year increase of 0.7ppt to 16.9% in the direct retail business, and the gross margin of the wholesale business increased 0.5ppt to 11.8% year on year. On the cost side, the sales expense ratio decreased 0.4ppt to 16.8% year over year, and the management expense ratio increased 0.1ppt to 2.8% year over year. The final net profit margin remained flat at 0.5% year over year. Among them, expenses increased by 11.22 million yuan in the first half of the year compared to the original standards due to the implementation of the new leasing guidelines.
3. Follow up on the progress of omni-channel integration and new retail. At this stage, the company is adapting to new trends in the industry, focusing on “goods+services” to continuously improve market competitiveness. In the retail business, we will speed up product development iteration, optimize product portfolios and carry out store transformation and business format innovation, while promoting omni-channel integration and interactive drainage; in the wholesale business, we will continue to strengthen in-depth cooperation with upstream and downstream to strengthen the introduction of high-quality brands and the development of our own brands. Follow up on the company's online and offline integration and new retail developments.
Profit Forecasting and Valuation
The current profit forecast remains unchanged. The current stock price corresponds to 8/7 P/E in 2019/2020.
The neutral rating was maintained, but based on the downward pressure of the retail industry and the uncertainty of transformation and transformation, the target price was lowered by 9% to HK$1.55. Corresponding to 9/8 times P/E in 2019/2020, there is room for the current stock price to rise 13%.
risks
Consumption continues to be sluggish; competition in the industry has further intensified.
