Mercury Home Textiles (603365) semi-annual report comment: 19H1 company performance exceeded market expectations 19Q2 performance improved significantly

Mercury Home Textiles (603365) semi-annual report comment: 19H1 company performance exceeded market expectations 19Q2 performance improved significantly

Event: The performance of H1 in 2019 exceeded market expectations, and the performance of 19Q2 improved significantly.

  The company’s 2019 H1 performance report released in 19H1 achieved revenue of 12.

7.5 billion (+9.

93%), realizing net profit attributable to mothers1.

3.5 billion (+12.

47%), deducting non-net profit is 1.

07 billion (-2.

23%), performance in line with our budget expectations, exceeding market expectations.

The difference between the growth rate of deducting non-net profit and returning net profit is mainly due to the company’s 19H1 government subsidy increasing by 105% to 24.73 million yuan, of which the financial subsidy / enterprise subsidy ratio increased cumulatively in the same period last year to 23.1 million yuan (+ 115%).

The company announced the 2019 semi-annual profit distribution plan, and a cash dividend of 2 yuan (including tax) will be distributed for every 10 shares, and the remaining undistributed profit will be carried forward to future distributions.

  By quarter, 19Q2 performance improved significantly.

In 19Q1 and 19Q2, the company achieved 6 in each quarter.

0 billion (+0.

75%), 6.

7.4 billion (+19.

64%); net profit attributable to mothers was 75.57 million yuan (+4.

22%), 59.03 million yuan (+25.

17%); realized non-net profit of 58.65 million yuan (-18.

86%) 48.35 million yuan (+30.

11%), it can be seen from the operating scale, the company’s 19Q2 improved from 19Q1.

  We think it is mainly due to the improvement of the company’s online channel improvement and rapid growth in the single quarter of 19Q2.

  1. Online channels resumed growth in the second quarter, and offline channels maintained a good momentum in the first quarter.

  Offline channels: It is expected that the offline channels in 19H1 will achieve double-digit growth.

We expect the company to maintain a good 19Q1 quarter and achieve double-digit growth.

At present, the number of company stores is about 2,700, and the stores are mainly franchised. The number of directly operated stores is expected to be around 100, mainly in a second-tier city market.

Through the two-tier franchise model, the company has deeply cultivated the low-tier city market in the early stage. It has only certain scale advantages and first-mover advantages, which is conducive to the deep exploration of channels.

According to our calculations, about 70% of Mercury’s current channels are located in lower-tier cities on the third and fourth tiers.

In the future, the company will use the secondary distribution model to continue to consolidate the channel advantages of low-tier cities, expand horizontally, and increase the density of opening stores while arranging blank markets. At the same time, the company will focus on the first-tier and second-tier cities.

It is expected that the offline growth for the whole year of 19 will be around 10%.

  Online channels: We expect that the online channels of 19H1 companies will achieve single-digit growth, of which the e-commerce channels will improve significantly in the single quarter of 19Q2, and double-digit growth is expected.

Due to the influence of traffic diversion from mainstream e-commerce platforms, and the addition of 18 years of low base Q1, the company’s growth rate in 19Q1 showed negative growth; however, in the process, the company adjusted the internal architecture layout through the rapid response of e-commerce subsidiaries to address the differentThe e-commerce platform carries out different marketing solutions and product arrangements. In the context of a low base of 18Q2, the company’s e-commerce channel in 19Q2 has resumed positive growth, exceeding market expectations and expected to achieve double growth.

  As one 杭州桑拿网 of the earliest companies in the industry to deploy e-commerce channels, the online channel has developed rapidly in recent years. Considering the company’s e-commerce channel foundation and better e-commerce operating capabilities, it is expected that the online channel will achieve double digits in 19 years.increase.
  2. Gross profit margin has increased, and net profit margin has improved slightly.

  Gross profit margin: The company achieved a gross profit margin of 37 in 19H1.

59%, 1 improvement per year.

72 points.

We believe that it is mainly the product structure adjustment and the impact of discounts.

The Q2 single quarter gross profit margin was 37.79% (+2.


  Expense ratio: The company’s expense ratio increased in 19H1, of which the sales / management / finance expense ratio was 20 respectively.北京会所体验网

21% (+2.

88pct), 7.

16% (-0.

06pct), -0.

35% (+0.


The reason for the increase in the sales expense ratio was the increase in advertising expenses, transportation expenses, and sales personnel expenses;

By quarter, the sales / management / financial expense ratio of the company in 19Q2 was 21 respectively.

37% (+1.

80pct), 7.

96% (-0.

61pct), -0.

39% (+0.


  Net Margin: As the gross margin rose slightly higher than the expense ratio, the company’s net margin improved slightly and remained essentially flat.

The company achieved a net margin of 10 in 19H1.

55% (+0.


Q2 net profit is 8.

76% (+0.


  3. Cash flow improved, and the improvement in the single quarter of 19Q2 was obvious.

  Inventory: As of June 30, 2019, the company’s inventory level was 8.

5.8 billion (+6.

99%), we think it is mainly the effect of stocking in autumn and winter.

19H1 inventory impairment loss was 736.

510,000 yuan (+45.

47%), an increase, but the proportion of falling price losses is not high, and the inventory structure is healthy.

19H1 inventory turnover is 0.

97 times (+0.

01 times), turnover efficiency remains stable.

  Accounts receivable: 19H1 company’s accounts receivable total 1.

41 ppm, an increase of 9 in ten years.

02%, a slight increase, basically flat with revenue growth.

  Operating cash flow: The operating cash flow of the company in 19H1 was -1.

150,000 yuan, ranking -1 last year.

9.8 billion yuan improved.Among them, Q2 single quarter company realized operating cash flow -365.

180,000 yuan, -1 compared with the same period last year.

There was a significant improvement of US $ 1.1 billion, and we believe that the sales increase was mainly due to a substantial increase.

  Repurchasing company shares as an incentive to demonstrate the company’s development confidence: The company intends to use its own funds to repurchase company shares in a centralized bidding transaction. The repurchase price does not exceed RMB 26 per share (inclusive) and the repurchase period does not exceed 12 months; The company’s share repurchase is mainly used for equity incentives or employee stock ownership plans, which demonstrates the company’s development confidence.

  Maintain “Buy” rating.

Considering that the company continues to benefit from the consumption upgrade in low-tier cities; the online growth will continue to stabilize after gradual improvement and measures are taken, and the company’s performance will continue to grow steadily in the long run.

Home textiles is a highly standardized industry. We believe that the conversion to e-commerce and offline channels continue to penetrate in low-tier cities, and the concentration of the entire industry will significantly increase.

We maintain our highest profit forecast, with revenues expected to be 30 in 19-21.

5.6 billion, 34.

7 billion, 39.

68 ppm with a growth rate of 12 respectively.

40%, 13.

53%, 14.

35%; net profit is 3 respectively.

310,000 yuan, 3.

8.3 billion, 4.

460,000 yuan, an increase of 16 in ten years.

15%, 15.

62%, 16.


Therefore, the EPS is expected to be 1 in 19-21.



67 yuan, corresponding to 14 for PE.



00 times.

Maintain the company’s 19x PE at 19, with a target price of 24.

80 yuan.

  Risk warning: offline channel revenue is less than expected, and new online channel shocks intensify competition.