Optimistic on O2O Business, Maintain “Buy” · 3/30/2016 · heavy online promotion events...

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Company Report: Intime Retail Group Company Ltd. (01833 HK) Andrew Song 宋涛

公司报告：银泰商业 (01833 HK) +852 2509 5313

[email protected]

30 March 2016

Optimistic on O2O Business, Maintain “Buy” 看好O2O业务，维持“买入”

Intime’s 2015 results beat consensus. Shareholders’ profit reached RMB

1,318 million, up 17.5% YoY riding on 12.3% YoY growth of retail revenue of

RMB 5,153 million and disposal of properties of RMB 602 million. Core net

profit during the period rose 6.4% to RMB 804 million. In 2015, total GSP

increased by 6.0% YoY to RMB 16,761 million but SSSG shrank to 0.5%,

dragged by the weak sales in 2H15, mainly due to the warm winter and

heavy online promotion events during the “Double 11” period.

O2O business and offline operating format innovations become new

drivers for retail. Apart from its existing O2O products such as Miaohuo

and Miaoke which are doing well, Intime has introduced new offline formats,

namely Jihood and InJunior. Through Employment Startup, the Company is

able to launch new innovative retail format continuously to meet consumer

demand. We are positive on the Company’s strategy which is to provide

competitive goods by reducing supply chain layers and O2O combination.

Maintain investment rating of “Buy” but cut TP to HK$10.46. Retail

industry is still facing challenges in 2016 and we trim 2016-2018 core EPS to

RMB0.391/0.449/0.488, respectively. 2016-2018 basic EPS is expected to

be RMB 0.624/0.667/0.706, respectively. We revise down TP to HK$10.46

based on SOTP method. Alibaba (BABA US) is likely to convert its CBs and

may be a potential catalyst for the stock price and we maintain our

investment rating as “Buy”.

银泰 2015 年业绩好于市场预期。股东净利为人民币 1,318 百万元，同比增长 17.5%，依

靠同比增长 12.3%至人民币 5,153 百万元的零售收入以及人民币 602 百万元的地产销售

收入。期内核心净利同比上升 6.4%至人民币 804 百万元。2015 年总销售收入同比增长

6.0%至人民币 16,761 百万元，但同店销售增长缩至 0.5%，受 2015 年下半年销售疲弱

所拖累，主要由于温暖的冬季以及“双十一”期间线上大量的促销活动所致。

O2O 业务以及线下经营模式的创新成为零售发展的新动力。除了公司已有的并且发展良

好的 O2O 产品例如喵货和喵客，银泰又推出了新的线下模式集货和 InJunior。通过员工

创业计划，公司得以不断推出新的零售模式来满足消费者需求。公司目前的策略是通过削

减供应链以及发展线上线下结合来提供具有竞争力的商品，我们看好这一策略。

维持投资评级为“买入”，降低目标价至 10.46 港元，零售业在 2016 年仍然面临着挑战，

我们削减了 2016-2018 年的核心每股盈利分别至人民币 0.391/0.449/0.488 元。

2016-2018 年基本每股盈利预计为人民币 0.624/0.667/0.706 元。我们采用分部加总法得

出目标价 10.46 港元。阿里巴巴(BABA US)预计将可能执行换股权并可能成为公司股价

的催化剂，我们维持投资评级“买入”。

Rating: Buy

Maintained

评级：买入 (维持)

6-18m TP 目标价: HK$10.46 Revised from 原目标价: HK$12.65

Share price 股价： HK$6.200

Stock performance 股价表现

Change in Share Price

股价变动

1 M

1 个月

3 M

3 个月

1 Y

1 年

Abs. % 绝对变动 %

2.1 (19.0) 25.8

Rel. % to HS index

相对恒指变动 % (6.7) (14.0) 42.1

Avg. share price(HK$)

平均股价（港元） 6.4 6.3 8.4

Source: Bloomberg, Guotai Junan Internat ional.

Year End 年结

Turnover 收入

Net Profit 股东净利

Basic EPS 每股净利

EPS 每股净利变动

PER 市盈率

BPS 每股净资产

PBR 市净率

DPS 每股股息

Yield 股息率

ROE 净资产收益率

12/31 (RMB m) (RMB m) (RMB) (△%) (x) (RMB) (x) (RMB) (%) (%)

FY14A 5,251 1,121 0.534 (32.8) 9.2 5.088 1.0 0.230 4.7 11.5

FY15A 5,755 1,317 0.604 13.2 8.5 5.060 1.0 0.321 6.2 12.1

FY16F 6,081 1,362 0.624 3.4 8.2 5.392 1.0 0.250 4.9 11.9

FY17F 6,614 1,455 0.667 6.8 7.7 5.795 0.9 0.267 5.2 11.9

FY18F 7,071 1,540 0.706 5.9 7.3 6.230 0.8 0.282 5.5 11.7

Shares in issue (m) 总股数 (m) 2,1880.0 Major shareholder 大股东 INTIME INTERNATIONALS 11.87%

Market cap. (HK$ m) 市值 (HK$ m) 13,516.3 Free float (%) 自由流通比率 (%) 78.3

3 month average vol. 3 个月平均成交股数 (‘000) 4,797.4 FY16 Net gearing (%) 16 年净负债/股东资金 (%) 38.1

52 Weeks high/low (HK$) 52 周高/低 17.022 / 4.838 FY16 Est. NAV (HK$) FY16 年每股估值 (港元) 10.5

Source: the Company, Guotai Junan International.

(50.0)

0.0

50.0

100.0

150.0

200.0

Mar-15 Jun-15 Sep-15 Dec-15 Mar-16

% of return

HSI index INTIME RETAIL GR

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Key Takeaways from Analysts Meeting:

SSSG saw a drop in 4Q15. It was mainly due to the warm winter and online sales promotion in November. However, the

management is confidence in the future’s performance and the sharp fall in 4Q15 will not be a trend. SSSG in Jan. to Feb.

2016 remained a negative number with -2% but then it saw a pickup in Mar. with 3% increase. The management expected

SSSG for the full year to be flat in the still challenging environment and the slowing down growth may be a “new normal” for

the Company.

Prepaid card sales stayed stable in 2015. The company’s 2015 prepaid cards sales recorded approximately RMB4.0 billion,

flat with that of RMB4.1 billion in 2014. According to the management, the purpose of the prepaid card is for customers’

convenience and to improve the value. The Company’s prepaid card buyers are dispersed and mostly for their own use. The

total purchase paid by prepaid card contributed around 23%-24% of GMV in 2015.

Improve staff efficiency by optimizing post setting. In 2015, Intime increased its total GFA by 11.8% YoY with only 2.6%

YoY. During the period, the Company cut the number of all staffs by 10.1% trough 1) technique upgrade like checkout counter

revolution and ERP system development to simplify financial statements and 2) management structure optimization to improve

efficiency. At the mean time, average salary of the staff in the Company achieved a double digit YoY growth and it is targeted

to keep the growth rate in the future.

“Same product in same price” in online and offline channels will be the trend in the future. Currently lots of brands

provide “online special design” with cheaper price but lower quality for online sales. However, the pattern ensures the profit

margin by harm the quality and violates the nature of retail. The Company has tried “same product in same price” during the

last “Double 11” period. The strategy faced difficulties including from the brand providers. Nevertheless, the Company will

implement the strategy for full time in the future and realize true omni-channel operating. In addition, the management does

not see internet or e-commerce as a challenge, which only amplifies the traditional retailers’ advantage or shortage. The

Company targets to provide competitive merchandises to consumers by cutting low efficiency supply chains.

O2O business update. Miaohuo has achieved total tickets of 98 thousand with GMV of RMB117 million from Mar. to Dec. in

2015. Miaoke’s aggregate tickets reached 242 thousand and total GMV was RMB188 million. Choice owns 7 stores with OFA

of 5,400 sq.m., which recorded a GMV of RMB43 million in 6 months. I Choice launched its mobile app recently, focusing on

European boutiques with competitive price and latest design. In addition, Intime has launched Jihood and InJunior offline

stores in 2H15. Jihood is in a select shop format, providing merchandises selected by the buyer team via reduced supply chain

which makes prices attractive. And InJunior is the first brand created in T-mall to land offline. In 2015, total E-commerce

business contributed approximately 6% for the Company’s total GMV and the proportion is targeted to be 10% in 2016.

The Company has resubmitted its whitewash waiver application. Alibaba (BABA US) owns convertible bonds of Intime

with conversion price of HK$7.29 per share. We believe Alibaba will convert its CBs to be controlling shareholder of Itime as it

is always Alibaba’s strategy to connect e-commerce and offline retailers to create synergies. It also may become a share price

catalyst.

Asset light reform is on track. The Company is conducting new asset disposal plans which will not be showed in the P&L

table. The first project is expected to be settled within a month with cash inflow of approximately RMB550 million. For the

non-core assets part, the Company still owns properties for sale of around RMB1,500 million which is expected to be sold in

the coming years.

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2015 Results Review:

Intime has achieved quite decent results in 2015 compared with its peers. Shareholders’ profit reached RMB 1,318

million, up 17.5% YoY on its 12.3% growth of retail revenue of RMB 5,153 million and disposal of properties of RMB 602

million, better than our expectation. Core net profit in the period rose 6.4% to RMB 804 million. In 2H15, retail revenue

increased by 11.3% YoY and YoY growth of core net profit slowed down to 1.1%, mainly due to the unfavorable weather and

promotion events.

Figure-1: Intime’s Total Turnover and YoY Growth Figure-2: Intime’s Retail Turnover and YoY Growth

Source: the Company. Source: the Company.

The Company’s total GSP increased by 6.0% to RMB 16,761 million in 2015. In details, concessionaire sales were RMB

13,988 million, up 3.1% YoY while direct sales were RMB 1,814 million, up 8.5% YoY. Direct sales contributed 10.8% sales to

the total GSP in 2015, up 0.2 ppt YoY, showing the Company’s effort in enhancing its buyer team and introduction of the

brands in T-mall to offline stores. Rental income soared 67.8% YoY to RMB 912 million, thanks to the larger available for

sublease areas added from new shopping malls instead of traditional department stores. SSS growth recorded 0.5% in 2015,

which has recovered from -3.3% in 2014 but dropped from 2.1% in 1H15. As mentioned above, SSSG saw a recovery in Mar.

2016. Total losses from new stores opening during 2013-2014 were approximately RMB 3,300 million and 7 of 17 stores has

reached breakeven. The operation of the new stores is in line with management and new stores losses are targeted to remain

around RMB 3,000 million in 2016.

Figure-3: Intime’s GSP and YoY Growth Figure-4: Intime’s GSP Breakdown


36.2%

25.3%

15.4% 16.4%

9.6%

0%

10%

20%

30%

40%

50%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2011 2012 2013 2014 2015

RMB mn

Turnover (LHS) YoY Growth (RHS)

36.2%

25.3%

15.4%

1.7%

12.3%

0%

10%

20%

30%

40%

50%

0

1,000

2,000

3,000

4,000

5,000

6,000

2011 2012 2013 2014 2015

RMB mn

Retail Turnover (LHS) YoY Growth (RHS)

33.0%

19.8%

12.6%

0.8%

6.0%

0%

5%

10%

15%

20%

25%

30%

35%

0

5,000

10,000

15,000

20,000

2011 2012 2013 2014 2015

RMB mn

GSP (LHS) YoY Growth (RHS)

88% 87% 86% 86% 83%

10% 10% 12% 11% 11%

2% 2% 2% 3% 5%

0%

20%

40%

60%

80%

100%

2011 2012 2013 2014 2015

Concessionaire sales Direct sales Rental income

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Table-1: Intime’s 2015 Annual Results Review

RMB mn 2014 2015 YoY Comment:

-Commissions from concessionaire sales 2,335.0 2,380.3 1.9%

-Direct sales 1,671.7 1,814.3 8.5% Build buyer team and introduction of T-mall brand

-Rental income 543.6 912.1 67.8% New shopping malls opened in 2014

-Others 37.6 46.5 23.5%

-Retail revenue 4,587.8 5,153.2 12.3%

-Sales of properties 662.7 602.3 -9.1%

Total revenue 5,250.6 5,755.5 9.6%

Other income 447.2 477.3 6.7%

Purchases of and changes in inventories (1,405.8) (1,533.2) 9.1%

Staff costs (759.7) (779.3) 2.6% Optimization of position

Depreciation and amortization (456.4) (497.0) 8.9%

Other operating expenses (1,655.5) (1,920.2) 16.0%

Other gains (net) 419.8 598.4 42.5% Disposal of Wuhan Department Store shares and fair value gain

Share of profit of an associate 343.1 284.5 -17.1%

Share of profit of jointly-controlled entities (33.9) (18.6) -45.0%

Operating profit 1,757.5 1,827.3 4.0%

Net finance income 47.7 14.3 -69.9%

Profit before tax 1,805.2 1,841.6 2.0%

Income tax expense (641.5) (492.5) -23.2% LAT differences

Profit for the year 1,163.7 1,349.1 15.9%

Minority interests 42.3 31.6 -25.2%

Net profit 1,121.4 1,317.5 17.5%

Adjusted net profit 755.8 804.4 6.4%

SSS -3.3% 0.5% 3.8 ppts

Commission rate 17.3% 17.0% -0.3 ppt

Gross margin of direct sales 15.9% 15.6% -0.3 ppt

Operating margin 11.1% 10.9% -0.2 ppt


Margins maintained stable in 2015. Direct sales margin was 15.9%, down 0.3 ppt YoY and concessionaire rate was 17.0%,

down 0.3 ppt YoY. The consolidated sales gross margin was 16.9%, slightly down 0.3 ppt YoY during the period. However, the

gross margins shrank 0.5 ppt compared to that of 17.4% in 1H15, mainly due to the more promotion events in the second half.

Also, fast growth of categories with higher margins such as cosmetics and woman apparel supported the consolidated margin.

Looking forward, we believe that the gross margin can be remained through optimization of supply chains, developing own

brands and enhancing own buyer team.

Figure-5: Intime’s Total Sales Proceeds by Product in

2014 and 2015

Figure-6: Intime’s Total Sales Proceeds YoY Growth by

Product in 2015

4%8%

22%

10%24%

15%

4%6%

4%3%

4%9%

21%

9%

25%

14%

5%

7%3% 3%

2014 (inner ring) 2015 (outer ring)

Boutique

Cosmetics

Gold & Jewelery

Leather

Women apparel

Men apparel

Children

Sports

Homes-10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

Boutique

Cosmetics

Gold & Jewelery

Leather

Women apparel

Men apparel

Children

Sports

Homes

Foods

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Intime plans to open 5 new stores in 2016. The Company only opened 2 stores in 2015, slowing down its pace in the tough

time. Through the store pipeline, we can see most of the stores to be opened are shopping malls with large GFA and almost all

the stores are leased instead of self-owned, in line with the Company’s asset light strategy. We believe the rental income could

keep fast growing thanks to the increasing available for subleased areas in the new shopping malls

Table-2: Store Pipeline

Province Location/Project Leased/Owned Ownership GFA(Sq.m.) Est. Opening Date

Zhejiang Xiasha Intime City Leased 100% 65,000 Opened in Jan. 2016

Hubei Jingmen Intime City Leased 70% 80,000 1H16

Zhejiang Wenzhou Daxiyang Intime City Leased 100% 120,000 2H16

Hubei Xiaogan Intime City Leased 100% 80,000 2H16

Anhui Bengbu Hualun Store Leased 100% 150,000 2H16

Anhui Hefei Binhu Intime City Owned 49% 120,000 TBC

Source: the Company.

Earnings Forecast and Assumptions and Revisions:

Revise down core net profit in 2016-2017 on still weak environment. As the whole retail environment remains lackluster

and the recovery seems to be slower than our previous expectation, we revise down 2016 SSSG by 1.5 ppts to 0.5% and cut

2016 GSP forecast by 2.6% to RMB 17,458 million. On the other hand, the Company still owns properties for sales worth

approximately RMB 1,500 million and plans to complete the sell in several years. Also the Company holds approximately 94

million shares of Wuhan Department Store (000501 SZ) available for disposal. So we revise up 2016-2017 shareholders’ profit

by 8.2% and 12.9%, respectively but cut 2016-2017 core net profit by 7.9% and 1.1%, respectively. Basic EPS is expected to

be RMB0.624, RMB0.667 and RMB 0.706 in 2016-2018, respectively and core EPS is expected to be RMB0.391, RMB0.449

and RMB0.488 in 2016-2018, respectively.

Table-3: Key Figure Revisions for Intime

RMB million New Old Change

2016F 2017F 2018F 2016F 2017F 2016F 2017F

GSP 17,458 18,476 19,541 17,930 18,408 -2.6% 0.4%

Retail revenue 5,481 5,914 6,371 5,725 6,020 -4.3% -1.8%

Cost of inventories (1,544) (1,635) (1,731) (1,562) (1,593) -1.1% 2.6%

Total revenue 6,081 6,614 7,071 6,225 6,520 -2.3% 1.4%

Staff costs (839) (900) (964) (859) (933) -2.3% -3.5%

Operating profit 1,812 1,963 2,043 1,740 1,746 4.1% 12.4%

Shareholders’ profit 1,362 1,455 1,540 1,259 1,289 8.2% 12.9%

Core net profit 852 980 1,065 973 989 -12.5% -0.9%

SSSG 0.5% 1.8% 3.0% 2.0% 1.7% -1.5 ppts 0.1 ppts

Concessionaire rate 17.3% 17.4% 17.5% 17.4% 17.5% -0.1 ppt -0.1 ppt

Gross margin of direct sales 15.8% 15.9% 16.0% 16.8% 16.9% -1.0 ppt -1.0 ppt

Source: Guotai Junan International.

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Figure-7: Intime’s Turnover and YoY Growth Figure-8: Intime’s Concessionaire Rate and Gross

Margin of Direct Sales

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

Figure-9: Intime’s Basic EPS Figure-10: Intime’s Core EPS

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

Reiterate investment rating of “Buy” but revise down TP to HK$10.46. Intime delivered decent results in the context of a

still challenging environment for the retail industry. The Company achieved a positive SSSG which outperformed most of its

peers. Facing the impacts from both slowdown consumption growth and competition from e-commerce, the Company adopts

its strategy “offering good products at inexpensive price” which is also the fundamental of the retail. The Company is taking

efforts to reduce layers of suppliers and conduct enhanced O2O combination to attract customers. We are positive on the

Company’s strategy and its ability to implement such strategy to compete in the retail industry. We apply SOTP valuation

method and value the retail part with 12x 2016 PER, slightly higher than industry average valuation based on its outstanding

performance. New TP is HK$10.46, representing 13.9x 2016 PER and 13.0x 2017 PER. In addition, the Company has

resubmitted the whitewash waiver application and Alibaba is like to convert its CBs and turn to controlling shareholder, which

may be a potential catalyst for the share price. We reiterate investment rating of “Buy”.

1.7%

12.3%

6.4%

7.9% 7.7%

0%

4%

8%

12%

16%

20%

3,000

4,000

5,000

6,000

7,000

2014 2015 2016F 2017F 2018F

RMB mn

Retail Turnover (LHS) YoY Growth (RHS)

17.3%17.0%

17.3%17.4% 17.5%

15.9%

19.8%

16.3% 16.7%

16.9%17.2%

17.3% 17.2% 17.3% 17.4%

13%

14%

15%

16%

17%

18%

2014 2015 2016F 2017F 2018F

Concessionaire rate Gross margin of direct sales

Consolidated gross margin

0.534

0.604 0.624

0.667 0.706

0.40

0.50

0.60

0.70

0.80

0.90

2014 2015 2016F 2017F 2018F

RMB

Basic EPS

0.360 0.369 0.391

0.449 0.488

0.10

0.20

0.30

0.40

0.50

0.60

2014 2015 2016F 2017F 2018F

RMB

Core EPS

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Table-4: SOTP Valuation SOTP Method RMB mn

Own commercial properties 1,68 million sq.m. RMB 15,000 per sq.m. 30% NAV discount 17,640

Core retail value of leased areas RMB 341 million 12x 2016 PER 4,088

Fair value of Wuhan Department Stores shares RMB 16.4 per share

(30 days average) 94 million shares 1,607

Net debt (4,399)

Total (RMB million) 18,937

Total (HK$ million) 22,815

Total shares (million) 2,181

NAV/share (HK$) 10.46

Source: Guotai Junan International.

Figure-11: Historical Forward PE Band of Intime Figure-12: Historical Forward PB Band of Intime

Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International.

Table-5: Peers Comparison

Company Stock Code Currency Last price

PE (fiscal year) PB (fiscal year) ROE(%)

D/Y(%) Market Cap

15A 16F 17F 18F 15A 16F 17F 18F 16F 16F HKD mil

HK - Listed Department Stores

Lifestyle Intl Hldgs Ltd 1212 HK HKD 10.200

8.6 8.9 8.6 8.4

1.5 1.3 1.2 1.2

15.9

5.6

16,346

Intime Retail Group Co Ltd 1833 HK HKD 6.200

8.4 12.6 11.0 9.9

1.0 0.9 0.9 0.9

8.8

4.4

13,516

Golden Eagle Retail Group 3308 HK HKD 9.070

14.0 13.6 12.5 n.a.

2.2 2.0 1.8 n.a.

16.1

2.9

15,231

Springland International Hol 1700 HK HKD 1.520

6.2 6.1 6.3 n.a.

0.6 0.6 0.6 n.a.

8.8

5.5

3,680

Maoye International Hldgs 848 HK HKD 0.780

23.4 n.a. n.a. n.a.

0.5 n.a. n.a. n.a.

n.a.

n.a.

4,010

Parkson Retail Group Ltd 3368 HK HKD 0.820

n.a. 11.9 10.0 6.3

0.4 0.3 0.3 0.3

1.8

4.7

2,179

New World Dept Store China 825 HK HKD 1.020

25.5 n.a. n.a. n.a.

0.3 n.a. n.a. n.a.

n.a.

n.a.

1,720

Shirble Department Stores 312 HK HKD 0.430

17.4 n.a. n.a. n.a.

n.a. n.a. n.a. n.a.

n.a.

n.a.

1,073

Simple Average 14.8 10.6 9.7 8.2 0.9 1.0 1.0 0.8 10.3 4.6

Weighted Average 11.6 11.2 10.3 8.9 1.4 1.3 1.2 1.0 13.0 4.4

HK - Listed Supermarkets

Sun Art Retail Group Ltd 6808 HK HKD 5.380

16.8 17.6 17.0 17.4

2.1 2.0 1.9 1.8

11.3

2.8

51,324

Lianhua Supermarket Hldgs -H 980 HK HKD 2.750

n.a. n.a. n.a. n.a.

0.8 0.8 0.9 n.a.

(0.2)

0.1

3,079

Beijing Jingkelong Co Ltd-H 814 HK HKD 1.630

22.0 203.8 19.4 n.a.

0.3 0.3 0.3 n.a.

0.1

1.8

672

Simple Average

19.4 110.7 18.2 17.4 1.1 1.1 1.0 1.8 3.7 1.6

Weighted Average

16.8 20.0 17.1 17.4 2.0 1.9 1.8 1.8 10.5 2.6

PRC - Listed Department Stores

Chongqing Department Store-A 600729 CH CNY 22.690

19.4 17.9 14.7 n.a.

1.9 1.7 1.6 n.a.

10.6

1.9

11,047

0

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10

15

20

25

30

35

20

07

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20

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/09

20

08

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11

/03

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/03

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20

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/03

20

13

/09

20

14

/03

20

14

/09

20

15

/03

20

15

/09

20

16

/03

HKD

Closing price (HKD) 3X 7X

11X 15X 27X

19X 23X 31X

0

5

10

15

20

25

20

07

/03

20

07

/09

20

08

/03

20

08

/09

20

09

/03

20

09

/09

20

10

/03

20

10

/09

20

11

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20

11

/09

20

12

/03

20

12

/09

20

13

/03

20

13

/09

20

14

/03

20

14

/09

20

15

/03

20

15

/09

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16

/03

HKD

Closing price (HKD) 0.3X 0.7X

1.1X 1.5X 2.7X

1.9X 2.3X 3.1X

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Beijing Wangfujing Dept St-A 600859 CH CNY 21.870

15.3 14.0 13.5 12.5

1.4 1.3 1.2 1.2

9.0

2.1

12,121

Rainbow Department Store-A 002419 CH CNY 13.640

9.0 20.9 18.1 20.8

2.0 1.9 1.8 1.6

9.3

2.6

13,072

Wuhan Department Store Grp-A 000501 CH CNY 17.520

12.7 11.6 10.6 n.a.

2.2 1.8 n.a. n.a.

17.5

0.0

11,101

Hunan Friendship & Apollo -A 002277 CH CNY 10.850

20.1 18.9 17.3 n.a.

1.8 1.6 1.5 n.a.

8.8

0.9

7,357

Hefei Department Store Grp-A 000417 CH CNY 8.130

21.6 19.4 17.1 n.a.

1.8 1.7 1.5 n.a.

8.5

2.0

7,594

Simple Average 16.3 17.1 15.2 16.7 1.8 1.7 1.5 1.4 10.6 1.6


Japan - Listed Department Stores

Isetan Mitsukoshi Holdings L 3099 JP JPY 1,360.000

18.0 18.9 17.7 16.6

1.0 0.9 0.9 0.8

4.9

0.9

36,705

J Front Retailing Co Ltd 3086 JP JPY 1,531.000

20.3 14.9 14.8 13.6

1.1 1.0 1.0 0.9

6.9

1.7

27,817

Marui Group Co Ltd 8252 JP JPY 1,629.000

27.7 23.3 19.3 17.6

1.4 1.4 1.3 1.3

5.9

1.3

31,625

Takashimaya Co Ltd 8233 JP JPY 966.000

14.6 14.5 14.8 14.0

0.9 0.8 0.8 0.7

5.9

1.3

23,354

H2O Retailing Corp 8242 JP JPY 2,012.000

20.5 16.8 15.2 14.1

1.0 1.0 0.9 0.9

5.9

1.8

17,270

Parco Co Ltd 8251 JP JPY 961.000

15.5 14.6 14.0 12.3

0.9 0.8 0.8 0.8

5.8

2.0

6,833

Simple Average 19.4 17.2 16.0 14.7 1.0 1.0 0.9 0.9 5.9 1.5


Other Major Emerging Markets - Listed Department Stores

S.A.C.I. Falabella FALAB CI CLP 4,676.300

21.9 20.2 17.8 15.7

3.1 2.7 2.4 n.a.

14.6

1.6

129,800

Lotte Shopping Co 023530 KS KRW 259,500.000

n.a. 14.5 12.9 11.7

0.5 0.5 0.5 0.5

3.4

0.8

56,039

Lojas Renner S.A. LREN3 BZ BRL 21.510

23.7 21.2 17.0 14.3

6.0 5.1 4.4 3.8

25.1

1.7

29,366

Hyundai Dept Store Co 069960 KS KRW 142,500.000

13.5 10.7 9.9 9.1

0.9 0.9 0.8 0.7

8.4

0.5

22,437

Shinsegae Co Ltd 004170 KS KRW 207,500.000

5.1 11.4 9.3 8.9

0.7 0.6 0.6 0.6

5.6

0.6

13,645

Robinson Department Store Pu ROBINS TB THB 50.250

25.9 22.8 19.9 17.0

4.1 3.7 3.3 3.0

16.9

2.1

12,351

Far Eastern Department Store 2903 TT TWD 16.700

15.1 13.5 12.7 n.a.

0.8 0.7 0.7 n.a.

4.5

5.6

5,756

Marisa Lojas Sa AMAR3 BZ BRL 6.800

n.a. 39.8 18.1 12.4

1.2 1.1 1.1 1.1

2.3

2.5

2,960

Parkson Holdings Bhd PKS MK MYR 0.900

20.4 10.1 7.8 7.1

0.4 0.3 0.3 0.2

3.8

7.6

1,881

Simple Average 17.9 18.2 13.9 12.0 2.0 1.7 1.6 1.4 9.4 2.6


Europe, North America and Australia - Listed Department Stores

Kering KER FP EUR 156.000

28.3 15.4 13.6 12.2

1.8 1.7 1.6 1.4

10.9

2.8

172,584

Macy'S Inc M US USD 44.420

10.3 13.6 11.6 11.0

2.8 3.2 3.1 3.6

22.3

3.4

108,283

Nordstrom Inc JWN US USD 57.310

15.1 17.8 17.7 16.0

4.5 11.4 13.4 14.0

36.2

12.9

76,846

Marks & Spencer Group Plc MKS LN GBP 404.500

13.6 11.7 11.1 10.4

2.1 2.0 2.0 1.9

17.2

4.6

73,176

Kohls Corp KSS US USD 46.550

10.9 13.4 11.4 10.9

1.6 1.6 1.5 1.5

11.7

3.6

66,839

Dillards Inc-Cl A DDS US USD 83.910

10.8 12.1 12.0 11.1

1.7 1.7 1.7 1.8

14.1

0.4

23,372

J.C. Penney Co Inc JCP US USD 11.430

n.a. n.a. 96.1 15.3

1.8 2.7 2.6 2.1

(31.8)

0.0

27,200

Debenhams Plc DEB LN GBP 74.000

9.7 9.6 9.3 8.9

1.1 1.0 1.0 0.9

10.6

4.7

10,129

Mothercare Plc MTC LN GBP 182.000

n.a. 19.3 12.4 9.7

4.0 280.0 219.3 175.0

17.9

0.0

3,467

Stockmann Oyj Abp-B Share STCBV FH EUR 6.640

n.a. 70.6 25.5 19.4

0.5 0.5 0.5 0.5

0.0

0.3

4,167

Myer Holdings Ltd MYR AU AUD 1.195

25.0 12.7 12.6 11.6

0.9 0.9 0.9 0.9

7.1

4.2

5,710

Macintosh Retail Group Nv MACIN NA EUR 0.010

n.a. 0.1 n.a. n.a.

0.0 0.0 0.0 n.a.

(10.5)

570.0

2

Simple Average 15.5 17.9 21.2 12.4 1.9 25.6 20.6 18.5 8.8 50.6


Global Large Ecommerce Conglomerate

Amazon.Com Inc AMZN US USD 593.860 464.0 63.8 42.3 28.8 20.9 15.5 10.7 8.6 20.3 0.0 2,168,213

Alibaba Group Holding-Sp Adr BABA US USD 78.080 46.8 29.0 23.1 18.6 8.3 5.8 4.8 3.9 30.4 0.0 1,499,051

Ebay Inc EBAY US USD 24.100 16.9 12.9 11.8 11.0 4.3 3.9 3.4 3.0 29.7 0.0 213,534

Yahoo Japan Corp 4689 JT JPY 479.000 20.5 15.8 19.5 17.6 3.8 3.2 2.9 2.6 22.1 1.9 189,635

Rakuten Inc 4755 JT JPY 1,086.000 33.6 19.8 16.4 13.9 2.3 2.2 2.0 1.7 12.0 0.5 105,806

Simple Average 116.3 28.3 22.6 18.0 7.9 6.1 4.8 4.0 22.9 0.5


China Vertical Ecommerce

Jd.Com Inc-Adr JD US USD 26.420 n.a. 528.4 71.2 30.4 7.7 8.5 8.0 6.4 (3.9) 0.0 283,423

Vipshop Holdings Ltd - Adr VIPS US USD 12.170 27.8 17.4 13.1 10.6 13.0 7.2 4.6 3.2 50.4 0.0 54,889

Jumei International-Adr JMEI US USD 6.390 27.9 16.1 10.7 8.6 1.7 1.5 1.4 1.2 9.3 0.0 7,092

E-Commerce China-Spon Adr -A Dang US USD 7.080 n.a. 107.3 21.5 n.a. 4.6 3.3 2.2 n.a. 39.5 0.0 4,434

Simple Average 27.9 167.3 29.1 16.6 6.8 5.1 4.1 3.6 23.8 0.0


Source: Bloomberg, Guotai Junan International.

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Financial Statements and Ratios

INCOME STATEMENT BALANCE SHEET

RMB mn, End Dec 2014A 2015A 2016F 2017F 2018F RMB mn, End Dec 2014A 2015A 2016F 2017F 2018F

Retail revenue 4587.8 5153.2 5481.1 5914.0 6371.2 PPE 5,994 5,975 6,200 6,283 6,243

Sales of properties 662.7 602.3 600.0 700.0 700.0 Investment properties 5,699 7,249 7,491 7,721 7,957

Total revenue 5,251 5,755 6,081 6,614 7,071 Prepaid land lease payments 1,603 1,545 1,542 1,526 1,509

COGS (1,406) (1,533) (1,544) (1,635) (1,731) Goodwill 536 536 536 536 536

Other income and gains 867 1,076 863 882 876 Total prepaid rental 74 116 134 164 188

Staff costs (760) (779) (839) (900) (964) Interest in associate & JCE 2,808 2,481 1,802 1,460 1,577

Depreciation and amortization (456) (497) (529) (570) (615) Others 1,961 1,869 2,255 3,640 4,563

Other operating expenses (2,047) (2,460) (2,505) (2,712) (2,879) Total non-current assets 18,675 19,771 19,960 21,329 22,572

Share of profit of an associate 309 266 285 285 285

Operating profit 1,757 1,827 1,812 1,963 2,043 Inventories 495 523 548 566 600

Aggregate loans and receivables 937 1,024 1,017 1,121 1,182

Net finance income 48 14 112 91 132 Due from related parties 1,801 1,411 1,501 1,619 1,745

Profit before tax 1,805 1,842 1,923 2,054 2,175 Cash and cash equivalents 2,129 1,581 1,369 1,334 1,491

Income tax expense (641) (493) (519) (555) (587) Others 3,756 3,967 3,257 2,897 2,367

Profit for the year 1,164 1,349 1,404 1,500 1,588 Total current assets 9,119 8,507 7,692 7,538 7,385

Minority interests 42 32 42 45 48 Deferred income tax liabilities 713 797 848 914 985

Shareholders' profit 1,121 1,317 1,362 1,455 1,540 Debt and borrowings 5,055 3,415 3,148 3,148 3,148

Core shareholders' profit 756 804 852 980 1,065 Others 48 46 46 46 46

Total non-current liabilities 5,816 4,258 4,042 4,109 4,179

Basic EPS (RMB) 0.534 0.604 0.624 0.667 0.706

Core EPS (RMB) 0.360 0.369 0.391 0.449 0.488

Trade and bill payables 2,080 2,622 2,489 2,734 2,810

DPS (RMB) 0.230 0.321 0.250 0.267 0.282 Other payables and accruals 6,111 5,504 5,238 5,173 5,081

Due to related parties 12 28 11 11 6

CASH FLOW STATEMENT Income tax payable 535 488 519 560 604

RMB mn, End Dec 2014A 2015A 2016F 2017F 2018F Borrowings 1,121 2,565 2,565 2,565 2,565

Liabilities, held for sale & others 338 789 0 0 1

Net Income 1,121 1,317 1,362 1,455 1,540 Total current liabilities 10,197 11,996 10,821 11,043 11,067

Depreciation & Amort., Total (661) (502) (522) (556) (585)

Change in working capital 664 (386) 27 405 228

Owner's equity 10,695 11,038 11,760 12,640 13,589

Income Tax Expense (641) (493) (519) (555) (587) Minority interests 1,086 987 1,029 1,074 1,122

Finance Income (217) (220) (209) (204) (166) Total equity 11,781 12,025 12,789 13,715 14,711

Finance Costs 169 206 98 113 33 BPS (RMB) 5.088 5.060 5.392 5.795 6.230

Others 567 1,005 1,047 373 778

Net cash from operating activities 1,002 928 1,284 1,031 1,241 FINANCIAL RATIOS

2014A 2015A 2016F 2017F 2018F

Capital Expenditure (1,941) (662) (1,337) (1,221) (1,126) Profitability

Sale of Property, Plant, and Equipment 9 300 400 400 400 Gross margin (%) 17.2 17.3 17.2 17.3 17.4

Net Decrease in Loans (174) 0 0 0 0 Operating margin (%) 11.1 10.9 10.4 10.6 10.5

Others 826 (311) 284 378 302 Net margin (%) 21.4 22.9 22.4 22.0 21.8

Net cash from investing activities (1,279) (673) (653) (443) (424) ROE (%) 11.5 12.1 11.9 11.9 11.7

ROA (%) 4.3 4.7 4.9 5.1 5.2

Total Debt Issued (Repaid) 82 (196) (267) 0 0 Payout ratio (%) 43.1 53.1 40.0 40.0 40.0

Issuance of Common Stock 1,353 0 0 0 0 Asset management

Total Dividends Paid (422) (699) (545) (582) (616) Inventory days 127.1 121.2 126.7 124.4 122.9

Others (392) 47 (31) (41) (43) A/C payable days 497.6 549.5 594.5 576.6 604.9

Net cash from financing activities 621 (849) (842) (623) (659) Debt management

Net gearing (%) 41.4 40.5 38.1 35.9 32.2

Increase in cash and cash equivalents 345 (594) (212) (35) 157 Debt/equity (%) 149.7 147.3 126.4 119.9 112.2

Foreign exchange effect 16 0 0 0 0 Liquidity

Cash and cash equivalents in cash flow 2,175 1,581 1,369 1,334 1,491 Current ratio (x) 0.9 0.7 0.7 0.7 0.7

Cash attributable to disposals group held for sale (45) 0 0 0 0 Interest cover (x) 10.4 8.9 18.5 17.4 61.1

Cash and cash equivalents in financial position 2,129 1,581 1,369 1,334 1,491 Div yield (%) 4.7 6.2 4.8 5.1 5.4


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Company Rating Definition

The Benchmark: Hong Kong Hang Seng Index

Time Horizon: 6 to 18 months

Rating Definition

Buy Relative Performance >15%; or the fundamental outlook of the company or sector is favorable.

Accumulate Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable.

Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral.

Reduce Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector Rating Definition

The Benchmark: Hong Kong Hang Seng Index / NASDAQ Composite Index

Time Horizon: 6 to 18 months

Rating Definition

Outperform Relative Performance >5%; or the fundamental outlook of the sector is favorable.

Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral.

Underperform Relative Performance <-5%; or the fundamental outlook of the sector is unfavorable.

DISCLOSURE OF INTERESTS

(1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for SMI Holdings Group Limited (00198 HK), Guangshen Railway Company Limited-H shares (00525 HK), China All Access

(Holdings) Limited (00633 HK), Guotai Junan International Holdings Limited (01788 HK), Binhai Investment Company Limited (02886 HK) and Link Holdings Limited (08237 HK), Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report.

(4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report within the preceding 12 months.

DISCLAIMER This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services and etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily). Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan. Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision. This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction. © 2016 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved. 27/F., Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong. Tel.: (852) 2509-9118 Fax: (852) 2509-7793 Website: www.gtja.com.hk

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