Seven Wolves: Clean Up Invalid Shop Process Continues, Fundamentals Thoroughly See Bottom

　　 Close Inefficient shops and adjustment of channel structure led to significant decline in wholesale business. In 2014, H1 contributed 130 million of its revenue, up by 20%+ compared to the same period, and its revenue increased to 13%.

Excluding online businesses, revenue from traditional offline channels was about 890 million, down 32.5% from a year ago.

H1 closed 347 channels to 3155, and the company did not disclose the number of direct and franchising channels. We estimate that the number of direct channel outlets has increased slightly, mainly from the 30 direct spanfer battalion of Wuhan Q4 in 2013, and about 130-140 of the direct channels in Zhejiang and Beijing in January 1, 2014. Because of this, we estimate that the income of direct report forms has increased slightly compared with the same period last year (retail sales are still declining), and the revenue of franchising channels has fallen by more than 40%. We expect channel adjustment to continue in the second half of this year.

Transfer Connally brand Drag on gross margin, relatively rigid costs, financial products revenue contribution narrowed the decline. The gross profit margin of H1 in 14 years dropped 1.9 percentage points to 45% over the same period, of which Q2 gross margin dropped sharply to 41.2%, mainly due to the spanfer of Connally brand with high gross profit margin in H1 (Hangzhou's clothing revenue 50 million in last year). In the process of large revenue decline, the cost is relatively rigid. The sales cost dropped by 3.43% to 195 million compared to the same period last year, but the cost rate increased 5 points to 19%. Wages and salaries (from 48 million to 54 million), decoration and prop amortization expenses (from 29 million to 43 million) increased significantly. Advertising in the first half of the year was relatively small (from 54 million to 22 million), and there was a substantial increase in the second half of the year. Management fees dropped by 4.19% to 108 million compared to the same period last year, and the cost rate increased by 2.6 percentage points, mainly from the increase in wage benefits (from 29 million to 35 million). We estimate that the absolute cost reduction in the second half of this year is unlikely. Due to the massive repurchase of stocks, the 2014H1 raises 57 million 620 thousand of the impairment loss over time and the increase in the proportion of impairment losses (the difference in the proportion of different periods). In addition, financial products and so on will generate more than 3500 investment income. The contribution of these two incomes narrowed the performance.

The credit granted to downstream dealers decreased significantly compared with the same period last year, with net operating cash flow of 328 million (43 million over the same period last year). Mainly due to the decrease in receivables, including 136 million receivables (290 million less than the same period last year, 140 million less than the initial period), accounts receivable 326 million (down 539 million from the same period last year, 49 million lower than the beginning of the year), 400 million stocks (up 104 million over the same period last year, 7 million increase over the previous period). The net cash flow of investment is 86 million (recovery of financial products), and the cash flow of financing is -6.1 billion (mainly due to the maturity of short-term financing bonds and repayment of bank loans due).

Maintain prudent recommendation ratings. Combined with 2013Q4 stock repurchase efforts, we estimate that the company's revenue will drop by 5% in the second half of this year, with an estimated annual decline of 16.5%, corresponding to 2 billion 300 million of the income scale. Considering the one-time disposal of inventory handling and impairment of goodwill, the impairment loss must return to normal level. We estimate net profit of 260 million in 2014, down 31.5% from the same period last year, EPS0.34 yuan, and the current stock price corresponds to PE27 times. We It is considered that 4 billion 700 million of the company's net assets (about 2 billion 600 million of net cash, more than 800 million of investment real estate) and 7 billion of the total market value provide a certain margin of safety for the stock price. From a fundamental perspective, this year the company has a heavy burden, and is expected to regain its positive growth next year and maintain a prudent recommendation rating. The text is finished. You can comment on alt+4.