Xujiahui'S Three Brands Are Misplaced In &Nbsp, Covering Different Levels Of Consumer Groups.

Core view

Three

Based on the core business circle, the single store operation ability is strong. At present, there are 5 main business circles in Shanghai. The company has 3 department stores: Huijin department store Xuhui store, Shanghai six hundred and Huiyuan commercial building are located in the mature and prosperous Xujiahui business circle. Huijin department store Hongqiao is newly opened in December 2008, and is located in the newly rising Hongqiao business circle.

Huijin department store Xuhui and Shanghai six hundred are the main stores of the company. The total contribution to the total revenue is 67.32% and the contribution to the total profit is 80.78%. The location of Huiyuan commercial office has maintained steady growth in recent years due to its workmen's benefits. The company has a strong ability to operate single stores, and its 3 stores in Xujiahui are located in sixth, thirteenth and 21 place in Shanghai department store in 2009.

The company has formed a good commercial reputation and reputation in Xujiahui business circle. With the rise of Hongqiao business circle and the increasing passenger flow, Huijin general store Hongqiao will become a new growth point of the company.

The 4 major department stores have their own property, with a total construction area of about 120 thousand square meters. They can provide the company with stable operating conditions and reduce operating costs while enjoying the added value of the property.

Coupled with a strong single store management capability, the company's profitability has been continuously improved.

In 2010, the gross profit and net interest rates were 28.55% and 9.5% respectively, much higher than the average level of the industry.

The 27.5% stake in Huijin department is the purchase of thickening profits. The company's fund-raising fund will be used to purchase Huijin department's 27.5% stake in addition to the replacement of Huijin department store in Hongqiao.

Huijin will become a wholly-owned subsidiary of the company after the completion of the acquisition. Considering Huijin department store Xuhui store is the main store of the company, the reduction of minority shareholders' equity will directly increase the net profit of the parent company.

In the next three years, we expect the replication and expansion of the single store business model. The company plans to develop into 2-4 stores in Huijin department store in Shanghai at the end of 2013, and then expand to 1-2 other cities with strong consumption power in the Yangtze River Delta after the conditions are ripe. After the conditions are ripe, 2-3 stores will be developed in the Shanghai area with six hundred brands of Shanghai, while the development of community chain businesses is characterized by the middle and low grade clothing and the Union food. At the end of 2013, Huijin supermarket will develop into 5-8 stores in Shanghai.

According to our calculation results, the acquisition of Huijin department's 27.5% stake will increase the company's EPS in 2011 by about 0.05 yuan.

If we do not consider the new stores in the future, we expect that the EPS will be 0.59 yuan, 0.64 yuan and 0.70 yuan after the 11-13 year dilution.

Taking into account the company's dominant position in the core business circle, we gave Xujiahui 28-32 times PE in 2011, with a reasonable value interval of 16.52-18.88 yuan.