\u3000\u3 Shengda Resources Co.Ltd(000603) 708 Jiajiayue Group Co.Ltd(603708) )
Key investment points
Core view: affected by price, economy, epidemic situation, impairment loss and other factors, the company’s Q4 performance in 2021 is lower than expected. In 2022, the operation of Q1 improved and the financial model was optimized. We still believe that the company is the most stable target in the business supermarket sector, and will show profit elasticity after the external negative impact recedes.
Adjust the profit forecast and maintain the “overweight” rating. Due to the persistence of the national epidemic exceeding previous expectations and the continuous downturn of food prices represented by pork, we adjusted our profit forecast and estimated that the company’s revenue from 2022 to 2024 would be RMB 189.8/216.3/24.26 billion respectively, with a year-on-year increase of 9% / 14% / 12%; The net profit attributable to the parent company was 280 / 400 / 560 million yuan (370 / 450 million yuan in the previous 22-23 years), with a year-on-year increase of 195% / 44% / 39%,; EPS is 0.46/0.66/0.92 yuan, corresponding to PE is 26.5/18.4/13.2. Optimistic about the company’s development strategy of regional intensive distribution and key construction logistics, and maintain the “overweight” rating.
The performance in 2021 was lower than expected: (1) the company realized an operating revenue of RMB 17.433 billion in 2021, with a year-on-year increase of 8.32%, a net profit attributable to the parent of RMB -293 million, with a year-on-year decrease of 168.61%, and a non net profit attributable to the parent of RMB -342 million, with a year-on-year decrease of 183.94%. (2) In 2021q4, the company achieved an operating revenue of 4.230 billion yuan, a year-on-year increase of 8.38%, a net profit attributable to the parent of -485 million yuan, a year-on-year decrease of 134796%, and a non net profit attributable to the parent of -496 million yuan, a year-on-year decrease of 165878%.
Pressure on the same store, loss in other places, provision for goodwill and other factors significantly dragged down the company’s performance: (1) affected by repeated epidemics, weakening consumption expectations, diversified channels and low CPI of fresh food, comparable stores fell by – 8.81% year-on-year in the whole year. (2) During the whole year, the expense rate was too high due to the weakness of the same store and the impact of the staff’s early reserves and the new lease criteria caused by more new stores, with a year-on-year increase of 3.13pct. (3) Affected by the epidemic situation and the economic situation, the cultivation cycle of non local stores was prolonged, and the regional subsidiaries in Hebei, Inner Mongolia and Anhui suffered losses of 66.26 million, 67.54 million and 76.01 million respectively. (4) Subsidiaries weilehui supermarket and Weike commercial chain have accrued goodwill impairment losses totaling about 297 million.
In 2021, 117 Direct stores were added, with a net increase of 74. In 2019, 2020 and 2021, the company added 80, 132 and 117 Direct stores, continuing the rapid opening speed. The growth of new stores not only led to the growth of the company’s operating revenue, but also increased losses in the stage of weak prosperity of the industry. At the end of the reporting period, the company had 1018 stores, including 971 Direct stores and 47 franchise stores.
The repair cost of Q1 has improved significantly in 2022. The net profit attributable to the parent company increased by 1.782 billion yuan year-on-year after deducting the net profit attributable to the parent company of 1.704 billion yuan, with a year-on-year increase of 2.518 billion yuan and a year-on-year net profit attributable to the parent company of 1.702 billion yuan. 22q1 company’s net profit margin on sales was 2.42%, which was greatly improved month on month. It mainly benefited from the optimization of the period cost rate, which decreased by 0.72 PCT year-on-year in 21q1. The optimization of cost rate mainly benefits from: (1) in the early stage, there were more manpower reserves in new stores outside the province, and now they have been optimized; (2) The new leasing standards lead to high expenses before and low expenses after; (3) Improve supply chain efficiency.
The lack of phased financial performance does not change the company’s strategic advantages. From the competitive factors and foreign experience, regional scale economy is the core competitive advantage of traditional retail enterprises, and Jiajiayue Group Co.Ltd(603708) has always practiced the regional intensive strategy, so it has achieved industry-leading financial performance in the past. We believe that this advantage will not change due to the fluctuation of industry outlook, so we are optimistic about the long-term development prospect of the company.
Risk tips: (1) the risk that the store expansion is less than expected; (2) The risk of intensified market competition; (3) The risk of declining marginal propensity of residents’ consumption; (4) The risk of continued low prices; (5) Risk of information lag.
