Common People (603883): Store Expansion Smoothly Promotes Steady Performance Growth

Common People (603883): Store Expansion Smoothly Promotes Steady Performance Growth
Event: On October 30, the company released the third quarter report of 2019: 83 in the first three quarters of 19 years.70 billion, an annual increase of 23.59%; net profit attributable to mother 3.9.4 billion, an annual increase of 21.44%; deduct non-net profit 3.7.3 billion, an increase of 20 in ten years.62%; net operating cash flow 7.07 billion, an increase of 20 in ten years.42%.EPS1.38 yuan / share.Company performance is in line with our previous expectations.  Comments: 1. The income growth rate has temporarily increased, and the profit growth rate has been steadily. In terms of quarters, the company’s income and profit maintained rapid growth.27 billion (+23.34%), 28.0.6 billion (+26.06%), 28.36 billion (+21.46%); net profit attributable to mother 1.60 billion (+22.15%), 1.1.1 billion (+22.02%), 1.2.4 billion (+20.12%); deduct non-net profit 1.4.6 billion (+15.98%), 1.10 billion (+25.17%), 1.1.7 billion (+22.50%).  The Q3 revenue growth indicator was slightly supplemented in the first half of the year, and is expected to be related to the improvement in the rate of self-construction and mergers and acquisitions in the third quarter under the environment where the policy of licensed pharmacists is becoming severe.  The company’s net cash flow from operating activities was 7.07 billion, an increase of 20 in ten years.42%, mainly due to revenue growth and inventory optimization.The inventory turnover days in the first three quarters of 19 were 87.7 days, an improvement from the 90 days of the same period last year.  In terms of gross profit margin, the gross profit margin for the first three quarters of 19 was 33.89%, compared to 35 in the same period before 18.56% fell slightly; in terms of net interest rate, the net interest rate in the first three quarters was 4.71%, compared with the same period in the previous 18 years4.79% down 0.08%.The decline in gross profit margin is expected to be related to the increase in the distribution business and the proportion of prescription drugs. In the future, the size of stores in each region will gradually expand, management costs will increase, and the brand and scale effect will be synchronized to ferment, and the company’s profitability will be promoted.  2. Self-built + mergers and acquisitions have steadily advanced, with strong integration capabilities. In the first three quarters, the company’s number of stores reached 4,808, with a net increase of 467 in the first three quarters (177 in the first quarter + 207 in the second quarter + 83 in the third quarter).In the first three quarters, there were 536 new direct-operating and M & A stores (389 direct-operated stores + 147 acquisitions), and a net increase of 467 (69 closed stores). Quarterly, Q1, Q2, and Q3 opened new stores 109 and 183 respectively., 97, acquired 91, 45, 11 and closed 23, 21, 25 stores, self-built stores accounted for 72 new stores in the first three quarters.57% (389 new direct sales / 536 new totals) (excluding franchise).Through rigorous selection of targets for mergers and acquisitions and all-round empowerment, the company has acquired more than 1,500 stores and gradually reached or even exceeded expected results. The company’s market share in the 11 key provinces of key development 杭州夜网 has steadily increased.  3.Full employee incentives In April 2019, the company awarded 161 incentive objects (7 executives + 200 core personnel).110,000 shares, accounting for 0 of the total share capital.57%, grant price 30.12 yuan / share; In September, a further 12 were awarded to 40 incentive targets (1 executive + 39 core personnel).930,000 shares at a grant price of 37.88 yuan / share, employees are fully motivated.The evaluation goals of equity incentives are: based on the net profit attributable to mothers in 2018, the growth rate in 19-21 is not less than 20%, 45%, 70%; the annualized growth rate is not less than 20%, 20 respectively.83%, 17.twenty four%.Incentive expenses amortization: RMB 19,608 / 1388 / 5.55 million in 19-21, with little impact on profits.  Profit forecast: Net profit is expected to be 5 in 201无锡桑拿网9-2021.29, 6.6, 8.3.3 billion, corresponding to PE is 37, 29, 23 times.Covered for the first time and given a “Buy” rating.  Risk warning: Store performance after mergers and acquisitions is less than expected.