\u3000\u3 China Vanke Co.Ltd(000002) 697 Chengdu Hongqi Chain Co.Ltd(002697) )
Performance description and core view: Chengdu Hongqi Chain Co.Ltd(002697) released the first quarterly report of 2022. The operating revenue of the company in a single quarter was 2.441 billion yuan, a year-on-year increase of 7.99%, and the net profit attributable to the parent company was 122 million yuan, a year-on-year decrease of 1.58%.
The operation of the company is in line with the expectation, and the income and profit are slightly lower than the expectation, mainly because the adjustment of stores is slightly higher than the expectation and the contribution of Xinwang bank is lower than the expectation, and the improvement of single store operation efficiency is higher than the expectation. Under the improvement of competition, after deducting the investment income of Xinwang bank, Gansu Hongqi and other investment income, the company’s main business profit has now returned to the growth channel at the inflection point, and the improvement has long-term sustainability; The exhibition store plans to have 1000 stores in 3 years; The subsequent accelerated growth and continuous improvement of business quality can be expected.
In 2022q1, the operating revenue was 2.441 billion yuan in a single quarter, with a year-on-year increase of 7.99%. The slight increase in revenue was mainly driven by the synchronous growth of stores and single store revenue, and the subsequent growth can be accelerated. In terms of the number of stores, the company continued to adjust stores from 21q4, but the company maintained the plan of one thousand stores in the three-year exhibition; In the same store, closing stores improves the operation efficiency of single stores and promotes the increase of single store revenue. The closure of stores in this quarter was slightly higher than expected, resulting in slightly lower revenue than we had expected. However, the improvement of store quality laid a solid foundation for subsequent expansion. Under the exhibition store planning, the subsequent growth can be expected.
The gross profit margin of the company in 2022q1 was 29.68%, a year-on-year decrease of 0.25pcts and a month on month increase of 0.26pcts. It has returned to the improvement range with the improvement of competition. However, due to the continuous decline of fierce competition last year, the gross profit margin has not achieved positive growth, and it is expected to enter the upward channel in the future.
The company’s 2022q1 sales / management / financial expense ratio was 22.5% / 1.21% / 0.83% respectively, with a year-on-year change of -0.14pcts / – 0.25pcts / + 0.16pcts. Among them: ① the sales expense rate was 22.5%, with a month on month decrease of 1.16 PCTs, mainly due to the improvement of competition. ② The management expense ratio was 1.21%, with a year-on-year decrease of 0.25 PCTs, which was diluted with the scale effect. ③ The financial expense rate was 0.83%, with a year-on-year increase of 0.16 PCTs. The fluctuation of financial expenses in this quarter is due to the decrease of interest income.
In 2022q1, the net profit attributable to the parent company was 122 million yuan, a year-on-year decrease of 1.58%, but the quality was significantly improved. In the first quarter of 2022, Xinwang bank and Gansu Hongqi realized an investment income of 21 million yuan, a year-on-year decrease of 32.59%. After restoration, the company’s main business attributable to the parent profit in this quarter was 9.12% year-on-year, higher than the growth of revenue. We believe that the growth rate of subsequent main business attributable to the parent net profit is expected to continue to be higher than the revenue, and the growth difference is expected to be further widened.
Investment suggestion: benefiting from the relatively good consumption situation and the improvement of competition in Chengdu, the company’s single store model has been greatly improved and sustainable, and Q1 has been reflected in various business data levels; With the development of Chengdu and its expansion into the province, there is still a large space for long-term exhibition shops. From the first quarter of 2022, it is expected to continue to maintain high-quality revenue growth and profit growth, and the growth is expected to accelerate. It is estimated that from 2022 to 2024, the company’s profit attributable to the parent company will be 563 million yuan, 647 million yuan and 698 million yuan. The main business has returned to the long-term rising channel and the valuation is low. It will continue to be recommended.
Risk warning: the consumer demand of residents has decreased; Operating costs continue to grow; Industry competition intensifies
