Hefei Department Store (000417): 1H19 net profit for two years -16.

6% of major retail businesses are under pressure

Hefei Department Store (000417): 1H19 net profit for two years -16.

6% of major retail businesses are under pressure

1H19 results are lower than our expected 1H19 results: revenue 59.

63 ppm, a six-year increase of 6.

9%; net profit attributable to mother 1.

370,000 yuan, corresponding to a profit of 0.

175 yuan, 16-year average of 16.

6%, deducting non-net profit twice extended 32.

7%, which was lower than our expectation, mainly due to the decline of the macro economy and increased competition, which brought down the profit of the main retail business and the impact of equity investment in Huarong Consumer Finance.

By quarter, Q1 / Q2 revenue is +9 each year.

6% / + 3.

3%, net profit is +5 each year.

7% /-66.

9%.

Development trend 1. Revenue growth has improved.

Revenue in the first half of the decade increased by 6 years.

9%, second-quarter revenue growth potential to increase.

By segment: 1) Department stores (including home appliances): Revenue for two years -1.

35%, mainly due to the intensification of industry competition and the market downturn. In terms of store efficiency, department store / appliance same-store revenue increased by +6 respectively.

4% /-11.

5%; 2) Supermarket: Ten years of revenue +5.

32%, same store revenue / net profit +1.

2% /-3.

3%, 2/5 new stores will be opened / closed in the first half of the year, and franchise development will be launched; 3) Agricultural products trading: revenue +3 for one year

47%, business expansion drives the annual circulation of agricultural products.

2%; 4) Real estate: Report consolidated revenue 3.

$ 4.6 billion, mainly due to the substantial increase in real estate sales of Zhougudui Real Estate Company.

2. Expense control needs to be strengthened.

In the first half of the year, the gross profit margin increased by 1.

7ppt to 20.

3%, we think it is mainly driven by high gross profit real estate and agricultural products trading business.

In terms of expenses, the sales expense ratio and the management expense ratio have been increased by 0.

1ppt / 0.

1ppt, maximize the financial expense ratio to 0.

2ppt, mainly due to the increase in loan interest expenses.

In addition, equity participation in Huarong’s consumer finance investment may also weigh on profits, with net profit margins falling by zero.

6ppt to 2.

3%, deducting non-net profit margin fell by 1 year-on-year.0ppt to 1.

8%.

3. Pay attention to the progress of SOE reform and the improvement of operating efficiency.

The main companies in the report focused on the core business, the department store business model focused on promoting digital transformation, 19 stores launched small programs, and the number of electronic members in the report increased by 78%; agricultural product circulation expanded new business space, and the scope of radiation continued to expand. Chizhou Top 100 Agricultural Product Logistics ParkThe project 深圳桑拿网 construction is advancing steadily; the supermarket format continues to expand outlet coverage and accelerates the takeover operation of standardized vegetable markets.

In addition, as the regional retail leader controlled by the State-owned Assets Supervision and Administration Commission of Hefei Province, the company will follow up on the reform of state-owned enterprises and the improvement of operating efficiency.

Earnings forecasts and estimates are based on increased competition in the industry. We cut our earnings forecasts by 6% / 6% to 0.

30/0.

32 yuan.

The current routine corresponds to 2019 / 2020e15 / 14xP / E, maintaining the outperform industry rating, and lowering the target price by 9% to 6 based on earnings forecast adjustment.

4 yuan, corresponding to 2019 / 2020e22 / 21xP / E, 41% upside compared 杭州桑拿 with the current consensus.

Risk consumption continued to weaken; industry competition intensified.