\u3000\u3 China Vanke Co.Ltd(000002) 419 Rainbow Digital Commercial Co.Ltd(002419) )
Events
In 2021, the company realized an operating revenue of 12.268 billion yuan, a year-on-year increase of 3.97%; The net profit attributable to the parent company was 232 million yuan, a year-on-year decrease of 8.41%; The deduction of non net profit attributable to the parent company was -88 million yuan, a year-on-year decrease of 385.58%. The net operating cash flow was 2.734 billion yuan, an increase of 165.11% over the previous year.
Due to the interference of internal and external factors, the sales of supermarkets and corresponding required categories are under pressure, and the purchase of 100 and optional categories have achieved restorative growth
The main business of the company is retail business, and the trend of gradually focusing on the main business retail during the reporting period; In 2021, the company achieved an operating revenue of 12.268 billion yuan, an increase of 468 million yuan over the same period of the previous year, an increase of 3.97%, of which the retail business achieved an operating revenue of 11.811 billion yuan, an increase of 591 million yuan over the same period of the previous year, accounting for 96.27% of the revenue, an increase of 5.26 percentage points over the same period of the previous year. For other business segments, in terms of real estate, the company disclosed earlier that most of the sales of real estate business had been carried forward in 2019, and the company did not reflect the income of real estate development business in 2021. It is estimated that the revenue of other businesses mainly comes from the revenue brought by management output and franchise stores. During the reporting period, the revenue decreased by 21.13% compared with the same period of last year, or related to the increase in the proportion of independent supermarkets in newly opened stores and the slowdown in the net growth of the number of convenience stores. It can be seen that the retail business contributed to all the scale growth and partially offset the impact of other business scale reduction, driving the total operating revenue to achieve a year-on-year growth of 3.97%.
From the perspective of categories and corresponding business formats, the sales growth of mandatory commodities corresponding to supermarket channels is relatively under pressure, the revenue scale of packaged food and fresh and cooked commodities is reduced compared with the same period of last year, and the daily necessities is only a slight increase; Due to the rapid growth of supermarkets in the community and the repeated development of supermarkets in 2020, it is difficult to maintain the rapid growth of supermarkets in the industry. The sales of optional categories corresponding to the shopping channel have more realized a significant year-on-year rebound in revenue. On the one hand, the impact of the epidemic on offline channels is more concentrated in the first half of 2020. Therefore, with the gradual maturity of epidemic control and the popularization of vaccines, offline formats have gradually recovered, which is demonstrated by the rapid growth of experiential formats in restaurants and entertainment and other stores; On the other hand, it can be seen that the growth recovery of optional categories also keeps pace with the performance of corresponding categories in social consumption, and the growth rate of clothing and cosmetics is in line with expectations; Overall, it is effective for shopper to improve its business ability by upgrading key stores, improving commodity structure, developing counter home business and other measures, and the performance of comparable stores is better.
From a regional perspective, the South China base camp where Shenzhen is located is still the main source of the company’s revenue; However, since new stores (excluding those in December) are more concentrated in East China and central China, it can be seen that central China contributes more to the increase of revenue. In addition, we need to pay attention to the potential impact of repeated outbreaks in Shenzhen. According to the statistical data released by Guangdong Provincial Health Commission, there were new confirmed cases in Shenzhen in months of 2021, with 128 new cases in the whole year; Among them, June was the most prominent, and 48 cases were diagnosed within one month; Since December, the impact of the epidemic in Shenzhen has increased. 1092 cases have been newly diagnosed since the beginning of 2022 (March 10). Therefore, the impact on the operation of offline stores in the first quarter needs to be paid attention to.
In terms of quarters, in the first quarter, with the easing of the epidemic situation and the expansion of vaccination coverage, China’s economic operation further improved. The company actively seized the opportunity of holiday promotion, which promoted the substantial growth of passenger flow and sales; In the second quarter, the scattered epidemic occurred in South China, the company’s main business area, the recovery of offline passenger flow was hindered, and the revenue fell slightly; In the third quarter, the revenue returned to growth, and the incremental contribution of South China and central China was large. The sales and operating revenue of 100 shopping formats showed a relatively rapid growth; In the fourth quarter, there were many dynamic sales nodes in the retail market. Actively grasping the promotion opportunities can effectively drive the growth of revenue. Looking back at the historical data, we can find that the first quarter and the fourth quarter are the traditional peak sales seasons of the company. Since the disclosure of the data (a total of 13 years), the average level of annual revenue can reach 27% – 28%. Combined with the above data on the current epidemic in Shenzhen, the scale growth of the company in the whole year may still be under pressure.
On the whole, the indicators of the company are greatly affected by the new income standards, and the comparability of data is affected. Specifically, the financial expenses of the company in 2021 increased by 328 million yuan compared with the same period of the previous year, mainly due to the increase of interest expenses recognized under the new lease standards; The net operating cash flow increased by 165.11% over the same period of the previous year, including not only the impact of the decline in sales affected by covid-19 epidemic in the same period of the previous year, but also the factor that the house rent paid in the reporting period was divided into cash outflow from operating activities and cash outflow from financing activities. Meanwhile, the profit and loss from the disposal of non current assets in the third quarter reached 273 million yuan, mainly due to the income generated by the urban renewal project of Qiaoxiang Road online Tianhong sorting center, which greatly thickened the net profit attributable to Q3.
During the reporting period, the company’s accounting policies changed. Under the new lease standards, the “interest expense” accrued by the effective interest method for the corresponding lease liabilities and the “depreciation expense” accrued for the right of use assets were added. The lease contract expenses of the recognized right of use assets and lease liabilities were no longer included in the “lease expense”, The total expenditure of the same lease contract will show the characteristics of “high in the front and low in the back (i.e. high in the early stage of the lease and then decreasing year by year)”, but the total expenditure during the lease term is equal to that under the original standard; According to the company’s announcement, the impact of the new accounting standards on the company’s annual profit in 2021 is about 348 million yuan. Accounting according to the old lease standard, the company realized a net profit attributable to the parent company of 512 million yuan in 2021, with a year-on-year increase of 101.94%, and deducted a net profit not attributable to the parent company of 191 million yuan, with a year-on-year increase of 518.19%.
The comprehensive gross profit margin decreased by 3.86pct year-on-year, and the period expense rate decreased by 1.68pct
During the reporting period, the company’s overall gross profit margin was 37.21%, down 3.86 percentage points from the same period last year, of which the gross profit margin of the main retail business reached 37.14%, down 3.84 percentage points from the same period last year, The change of the company’s gross profit margin mainly lies in the change of accounting standards and the lack of convenience stores in comparable stores (in 2020, the gross profit margin of comparable stores reached more than 40%, exceeding the existing average level). In terms of product categories, affected by the epidemic and the decline of people’s consumption enthusiasm, the gross profit margin of catering and entertainment decreased by 27.14% compared with the same period last year, with the largest decline. In addition, there are still furniture, children’s products, cosmetics and clothing, which decreased by more than 10% compared with the same period last year, which led to the decline of the overall gross profit margin in 2021.
Due to the change of accounting standards in the current period, on the one hand, it will affect the cost of depreciation and amortization, so it may further directly affect the items of operating costs, selling expenses and administrative expenses, thus affecting the gross profit margin, selling expense rate, administrative expense rate, etc; At the same time, it is also included in the financial expenses (interest expenses), which has an impact on the financial expense rate. Specifically, in 2021, the company’s period expense ratio was 39.02%, a year-on-year decrease of 1.68 PCT, which was mainly affected by the sharp narrowing of the sales expense ratio. The core reason was that the property and leasing expenses decreased significantly by 1.121 billion yuan to 145 million yuan compared with the same period of the previous year. In addition, the depreciation and amortization expenses increased significantly by 533 million yuan to 994 million yuan; The financial expense rate was 2.59%, which was significantly different from the financial expense rate under the old lease standards in the same period last year, mainly due to the increase of interest expenses recognized in the reporting period.
Continue to adjust the business structure, optimize the store experience and clear out inefficient assets
In the face of the continuous outbreak of the epidemic in many places in China, which has led to the continuous downturn of consumer sentiment in China, the company continues to adjust the business structure and optimize the content of stores to better meet the needs of consumers. On the one hand, the company continues to promote the change of business structure and the adjustment of store content, upgrade stores, break through the high-end supply chain, and introduce international cosmetics and light luxury brands; At the same time, we will strengthen the “one store, one discussion” to improve the value of stores. All stores continue to launch high-quality joy and cultural marketing and scene experience, and innovatively launch five scene services, including fashion clothing, parent-child play, happy dinner, food exploration and private housekeeper. On the other hand, the company successfully divested inefficient assets and focused on its main business. In December 2014, the company acquired 100% equity of Tianhong Weiwo to achieve scale effect and improve the layout of the company in the convenience store market. However, recently, the company’s convenience store business showed fatigue. By the end of June 2021, the net assets of Tianhong Weiwo had been reduced from 6.9306 million yuan at the beginning of the period to 78000 yuan, and the net profit loss was 6.1433 million yuan. The company stopped losses in time, signed the equity transfer intention agreement with China Rosen in September, and officially listed for transfer in November. With the completion of the equity transfer of convenience stores, the company will focus more on its main businesses such as supermarkets, department stores and shopping centers, strengthen its advantages, pack light and continuously improve the quality of statements, so as to bring better and faster development.
With the continuous development of digital technology, the quality of supply chain has been highly praised by customers
During the reporting period, the company reconstructed the digital middle office, used digital technology to improve the management efficiency and intelligent level of the company, and put high efficiency and low cost into all aspects of the company; At the same time, through the digital platform, the company’s information can flow better across business formats and regions across the country, forming the effect between different regions; In addition, through the digital platform, the company can better accumulate customer data. Through the use of big data and other technologies, the company can gain insight into customer needs, improve customer experience, accurate supply and personalized services. At present, the sales generated by the supply chain sharing at the counter home have increased by 245% year-on-year, further realizing resource sharing and customer convenience. On the other hand, the company strengthened the building of strategic core commodity group, and its own brands cooperated with more than 150 high-quality enterprises. In 2021, the sales increased by 6% year-on-year, accounting for 9% of supermarket sales. The company has created rice, pure milk, cherizi, durian and other explosive products with sales of more than 10 million, and launched Tianyou Maotai flavor wine in December, which better meets the needs of target customers for high-quality goods. 3R commodities initially formed Kwai fresh semi finished products, fast food dishes and field hand based commodity groups, and sales in 2021 increased by 19% over the same period last year. In 2021, the sales of international direct mining increased by 4.7% year-on-year, and 14 overseas suppliers were newly developed. At the same time, the company further accelerated online commodity sales, actively developed the second growth curve, and the online sales and digital membership continued to increase rapidly;, During the reporting period, nearly 250 million people exchanged information or consumption through Tianhong app and Tianhong applet, and the overall number of digital members of Tianhong exceeded 36 million. Gmv’s revenue from online commodity sales and digital services exceeded 5.1 billion yuan.
Investment advice
We believe that the company is unique in the industry with its characteristic advantages of leading service and quality among department stores, shopping centers, supermarkets and convenience stores. Guided by customer demand, the company deeply cultivates online services through digital technology, creates high-quality services through business upgrading, provides efficient services through supply chain transformation, and improves the efficiency of commodity category management. The company’s performance growth in 2021 is mainly supported by the following three aspects: ① the impact of the epidemic is reduced year-on-year, resulting in a clear expectation of the restorative growth of 100 stores in the first half of the year, supporting the steady development of the revenue of stock stores; ② The increase of passenger flow and sales volume brought by new stores and holidays will be directly reflected in the first quarter and the fourth quarter of the traditional peak season; ③ Digital development injects positive expectations into the company. In the long run, the company has a steady pace of expansion and sufficient store reserves in terms of extension; The rapid growth in the area of comparable stores of shopping malls and independent supermarkets can continue to support the improvement of the scale of comparable stores of the company; However, considering that the epidemic situation in Shenzhen, where the company’s headquarters is located, was more serious in the first quarter, or it continued to have a negative impact on short-term operations. Under the updated accounting standards, we predict that the company will achieve revenue of RMB 127.12/136.30/146.51 billion in 2022, 2023 and 2024 respectively. According to the newly published accounting standards, the net profit attributable to the parent company will be adjusted to RMB 237281/334 million, corresponding to PS of 0.60/0.56/0.52 times, EPS of 0.20/0.24/0.29 yuan / share and PE of 32 / 27 / 23 times, maintaining the “recommended rating”.
Risk tips
The risk of diversion of competition in the consumer market, the risk of intensified competition in the retail industry, the risk of long cultivation period of innovative business, and the risk of store opening quality brought by fast opening.
