AOKANG Business Revenue Grew Year-On-Year, Leather Products Were Better Than Finished Shoes.

In the first half of 2012,

Operating income reached 1 billion 618 million yuan, an increase of 21.8% over the same period last year, operating profit of 333 million yuan, an increase of 36.3% over the same period last year, and net profit of owners belonging to the parent company increased by 258 million yuan, up 19.4% over the same period last year, and realized a basic earnings per share of 0.64 yuan.

The company's revenue grew steadily.

During the reporting period, the revenue grew by 21.8% over the same period last year. The reasons for the company's growth were: 1) the continuous expansion of the marketing network, 408 new stores in the first half of the year, 70 to 547 new outlets, 338 to 4373 outlets, 2 rapid growth of e-commerce and group buying, 3) increasing the promotion of leather products and

The opening of stores promotes the growth of leather goods.

For the company's future revenue situation, our judgement is still able to maintain steady growth. On the one hand, the company's multi brand strategy has achieved initial success. Kanglong and the red Firebird have entered the rapid expansion stage. On the other hand, the company launched the AOKANG brand "small store big change shop" strategy to promote AOKANG brand single store revenue to continue to improve.

Leather business expansion is the highlight.

After 08 years of becoming an Olympic leather goods provider, the company has been developing leather products business. In the first half of this year, the leather products promotion was not only intensified, but also the leather stores were established, making the income of leather goods increased by 37.7% to 134 million yuan compared with the same period last year. The growth rate of leather goods was significantly higher than that of men's shoes and women's shoes. The gross profit margin of leather goods also increased by 14.1 percentage points to 38.9%, significantly higher than that of men's shoes, compared with that of men's shoes in the first half of this year.

The gross profit margin is 37.6% and 35.4%.

Gross profit margin has room for continuous improvement.

In the first half of the year, the gross profit margin of the main business of the company increased by 2 percentage points to 36.8% compared with that of the previous year. We expect that the gross margin of the company still has room for improvement. The specific reasons are: 1) the continuous decline in the OEM business share of the low gross margin; 2) the expansion of the direct investment channel by raising the investment project; 3) enhancing the zero sales control capability and improving the logistics distribution system, helping to achieve timely adjustment of goods between stores; 4) increasing the control of raw material cost through centralized procurement; 5) supporting the key foreign exchange factories to change the price.

Profit forecast and investment rating.

Taking into account the company's multi brand operation into the harvest period and the continuous increase of gross margin, we upgraded the company's 12-14 year performance forecast, EPS was 1.45 yuan, 1.86 yuan and 2.36 yuan respectively, corresponding to PE 17 times, 14 times and 11 times respectively, and maintained the recommended rating for the company.