Hailan House (600398): Additional attractiveness of relatively modest growth estimates

Hailan House (600398): Additional attractiveness of relatively modest growth 四川耍耍网 estimates

The 1H19 results were slightly lower than our expected 1H19 results announced by Hailan House: operating income 107.

20,000 yuan, an increase of 7 in ten years.

1%; net profit attributable to parent company 21.

30,000 yuan, an annual increase of 2.

9%, corresponding profit 0.

48 yuan.

The performance was slightly lower than our expectation, as the annual increase in expenses during the second quarter was extended: 2Q19 single-quarter revenue increased by 9.

6%, net profit decreased by 2.

1%.

Online progress has been slow, and offline channels have resumed expansion.

Online income 5.

8 ppm, only a growth of 0 per year.

3%, accounting for 5 of total revenue.

4%; offline revenue increased by 8.

1%, mainly driven by channel expansion: As of June 2019, the total number of company stores is 7,740 (408 directly operated stores, 7,332 franchised and affiliated stores), more than + 27%, of which Hailanzhijia brand stores 5,449+ 16% per year; 1,241 rabbits in the past, + 7% in the past; 1,050 stores in other brands, + 329% in the past.

The initial net openings are mainly from the Hailan House series (with a net increase of 152), while Ai Jutu tandem nets closed 40 stores and other brands opened 83.

The growth of Hailan House is steady, and Aiju Rabbit has improved, and other brands have entered the growth stage.

In terms of brands, the main brands Hailan House, Aijutu, San Kenuo, and other brands saw an increase in revenue5.

1%, content 9.

8%, an increase of 12.

9%, an increase of 993%, contributing 80%, 5%, 9%, 3% of the total revenue, respectively, with gross profit margins of 44.

6%, 12.

5%, 48.

6%, 24.

9%.

Profitability: gross margin ten years +1.

1ppt to 41.

0%, but the gross profit margin of direct sales decreased by 3.

4ppt to 59.

7% reflects the increase in sales promotion discounts; the increase in directly-operated stores has led to an increase in sales expense ratio by 1.

6ppt to 9.

3%; the increase in employee wages and depreciation stalls led to an increase in the management expense ratio1.

0ppt to 5.

6%.

Operating cash flow decreased by 41% annually, mainly due to the increase in cash paid for other operating transactions.

Development Trend The company’s industrial layout continues to advance, ending the 6-month shareholding in Yingying’s infants and children reaching 66.

2%, obtained the company’s actual control to join its consolidation.

In addition, the company plans to use RMB 6.91-10.

US $ 3.6 billion in own funds for the second phase of share repurchase.

Earnings Forecasts and Estimates We maintain the company’s 2019 and 2020 earnings forecasts and zero.

84 yuan and 0.

92 yuan is unchanged, corresponding to an annual increase of 7.

5% and 9.

9%.

Currently it corresponds to October 2019 and October 2020.

1x and 9.

2 times price-earnings ratio.

Maintain Outperform rating and 10.

Target price of 93 yuan, corresponding to 13.

0 times 2019 P / E ratio, 28 compared with the recent merger.

7% upside.

We are still bullish on the company’s relative growth certainty under the uncertainty of consumer sentiment and the company’s potential attractiveness.

Risk Terminal inventory is high risk, opening a store exceeds expected risk.