Hongqi Chain (002697): Q3 performance grows rapidly and profitability enters the climbing cycle

Hongqi Chain (002697): Q3 淡水桑拿网 performance grows rapidly and profitability enters the climbing cycle
Core point of view: The profitability of the main business continued to improve, and Xinwang Bank contributed incremental income. The company released a three-quarter report, and it is estimated that the net profit attributable to the mother will be about 1 in the third quarter of 19th.6.2 billion-1.USD 7.2 billion, a year-on-year increase of 60% -70%; excluding the net banking income, it is estimated that the main retail business’s net profit growth in 3Q19 will exceed 25%, exceeding market expectations.It is expected that the net profit attributable to mothers will be about 3 in 1-3Q19.84 billion-4.Ten percent of 09, an increase of 50% -60% each year. We think this year is the most important year for improving the company’s fundamentals: 1) The company has successively acquired Hongyan, Four Seas, Reciprocity, etc. since 2015. The current internal integration is basically complete, as reflected in the number of closed stores from 108 in 2016The number of stores opened in 2018 increased from 119 in 2017 to more than 200 in 2019. 2) Store categories continue to be enriched and competitiveness is enhanced.In 2018, the company attracted Yonghui Supermarket to invest in stocks and strengthened the fresh shortcomings. At present, it has transformed about 200 fresh and strengthened stores; the company acquired 9010 convenience stores in 2019, and its food supply chain, Budweiser Food, strengthened the company.With breakfast category. 3) The company’s monopoly is constantly strengthened.Data from China Chain Store and Franchise Association show that as of 5M19, the company’s market share in Chengdu is about 48.5% (only 40% in 2013), and maintain the speed of 200+ stores opening each year, user stickiness is constantly strengthened (5 million active members, each has an average person), and the upstream bargaining power is strengthened. Profit forecast and investment advice The company adheres to the expansion of competition barriers with “goods + services”, relying on dense offline outlets, the brand has gained popular support.In the next three years, the company will enter a ramp-up cycle of efficiency and net interest rate. Considering the company’s regional monopoly and growth, the overlapping new network bank will continue to contribute incremental income, and it is expected that it will return to its net profit in 2019-2021.62/5.57/6.64 ppm, referring to the estimated situation of comparable retail leaders, gives the company 24xPE for 19 years, corresponding to a reasonable value8.15 yuan / share, maintaining the “overweight” rating. Risk warning: store expansion progress target; Yonghui’s integration of the company’s stores is not up to expectations; the store product structure optimization progress is slow; rents, labor costs increase, and fee control effects are not up to expectations.