Mercury Home Textiles (603365) 2018 Annual Report Review: Long-term offline stable Q4 online resumes growth


Mercury Home Textiles (603365) 2018 Annual Report Review: Long-term offline stable Q4 online resumes growth

The company released its 2018 annual report and achieved revenue of 27.

1.9 billion (+10.

44%), achieving net profit attributable1.

0.4 billion (+10.


Among them, Q4 achieved 9 in a single quarter.

1.6 billion (+4.

67%), and realized a net profit of 1.04 million yuan (+3.


At the same time, the company announced the profit distribution plan for 2018, and plans to distribute a cash dividend of 5 yuan (including tax) for every 10 shares.

The revenue baseline is stable offline, and Q4 online resumes growth. From the online perspective, the company continues to advance its strategy of establishing different organizational structures for various e-commerce platforms, and actively expands social platforms (beidian, cloud gathering, etc.) and the three major mainstreams.Distribution platform, Q4 single-quarter online revenue resumed growth and is expected to increase by 10% -15% (Q1 / Q2 / Q3 growth rates are about 24% /-10% /-5% +, respectively), and most online revenues are also increasing7.

28% to 10.

2.2 billion.

However, the emergence of social platforms has led to fierce competition for low-priced products. As the flow of various e-commerce platforms is tilted towards lower-priced products, sales of mid-to-high-end products have been affected, and the company’s overall online revenue growth rate has been 48 compared with the previous year.

77% obviously, boots useful online revenue share in 2018 from 38 in 2017.

71% fell to 37 in 2018.

6%; therefore, in 2019, the company will also pay more attention to the promotion of high-performance brand Belle and Jane Color Life, and will ensure the steady growth of online business by developing more cost-effective products.

In the offline area, the initial revenue was 16.

9.6 billion (+12.

43%), of which Q4 single-quarter offline revenue growth rate index (Q1 / Q2 / Q3 increased by about 24% / 24% + / 14 respectively.


H2’s offline revenue growth is accelerating the transition, or it may be affected by the short-term industry demand and the slightly distorted progress of the 2018 H2 store expansion. It is expected that there will be a gradual net increase of about 90 stores.

In the future, by steadily opening stores and improving store efficiency (increasing theme promotion and reducing discounts), it is expected to maintain steady growth.

武汉夜生活网 Changes in income structure have led to a decline in gross profit margin, and an increase in investment income has led to an increase in net profit margin.

Overall gross profit margin decreased by 1 in 2018.

25PCts to 35.

11%, mainly due to the decrease in the proportion of online businesses with higher gross profit margins, while the increase in the proportion of non-self-operated e-commerce businesses with reduced gross profit margins also led to a decrease in online gross profit margins2.

77PCT (42.

46%), while offline gross margin is expected to remain stable.

In terms of expenses, the sales expense / management and R & D expense ratio increased by 0.

51 / -0.

78PCT to 16.

42% / 6.


In addition, new investment income of 15.12 million yuan in this period (2017: 53.

450,000), on the whole, the net interest rate was basically the same as the previous year, reaching 10.

48% (+0.

03PCTs). Inventory turnover accelerated, and H2’s operating net cash flow picked up.

Company Inventory in 2018 7.

8 billion (+4.

43%), accounting for 28 of total revenue.

67% (-1.

65PCTs), and the inventory turnover days are reduced by 1 day, and the inventory indicators continue to be optimized.

During the same period, the company’s accounts receivable increased by 47.

25% to 1.

7.7 billion, revenue account turnover days increased by 4 days, mainly due to the increase in e-commerce distribution platform sales, and the payment account period has not yet arrived.

In addition, the long-term operating net cash flow and net profit are basically matched. In 2018, H1 was a negative main reason for the increase in raw materials, which was caused by the company’s advance stocking, while H2 turned positive mainly due to the increase in some prepayments in Q3 and the peak sales season in Q4.

Profit forecast and investment advice.

The company is a leader in home textiles in second and third tier cities in China, with outstanding cost performance advantages.

The 2700 general stores widely cover the main force of consumption upgrade in the low-end home textile industry, and the channel layout is in line with product positioning.

At the same time, the company’s e-commerce channel has the first-mover advantage and obvious benefit advantages. The rise of social online e-commerce in the short term has led to fierce competition for low-priced products, and the boots tilted traffic to low-priced products, leading to the company’s online growth rate.

Therefore, the company also actively enters social e-commerce, and obtains new social platform traffic by launching more cost-effective products.

In the long run, the recent rise of low-cost home textile consumers is mostly entry-level. Driven by the subsequent pursuit of quality, these consumers are still expected to return to mainstream e-commerce brands. Long boots will drive e-commerce business revenue and gross profit margins to rise.

Taken together, the company’s e-commerce channel advantage remains, and the overlapping offline channels continue to sink. In the future, the company is expected to achieve a continuous increase in the city’s share in the industry’s centralized concentration trend.

It is expected that the attributable net profit for 2019/20/21 will be 3 respectively.



1.5 billion, with growth rates of 12 respectively.

29% / 14.

52% / 13.

15%, EPS is 1.



56 yuan, current price corresponding estimates are 16/14/12 times, maintaining the “overweight” level.

Risk warning: industry demand is lower than expected; franchise business is lower than expected; e-commerce growth rate and gross profit margin are lower than expected.