Good Kids Net Profit Fell 13.5%, But The Stock Price Rose 3. What's The "Cat's Mouth"?

In March 26th, the good boy announced the 2017 annual performance report. The results showed that the company realized HK $7 billion 143 million in 2017 (the same below), an increase of 14.5% over the same period.

A seemingly out of date annual report can make good kid's International (01086) share price rise 3 percentage points in 4 days. What's the trick?

It is learned that in March 26th, the good boy announced the 2017 annual performance report. The results showed that the company realized HK $7 billion 143 million in 2017 (the same below), an increase of 14.5% over the same period.

But sales and distribution expenses in 2017 reached 1 billion 332 million yuan, an increase of 35.64% over the same period last year, and administrative expenses reached 1 billion 103 million yuan, an increase of 19.37% over the same period. In addition, the company income tax expense was 67 million 132 thousand yuan, and the same period was 50 million 395 thousand yuan in 2016.

After the period of fees, taxes and other items were taken over, the good children realized a profit of 179 million yuan in 2017, a decrease of 13.5% compared to the same period last year.

From this, it seems that we can draw a preliminary conclusion that good boy's international revenue in 2017 has double digit growth, but the company has spent a lot of effort in order to increase its revenue, but the result is not satisfactory. It is rather unprofitable. At this point, what investors want to do is very simple: selling good kids' international stocks instead of buying them.

But in fact, on the contrary, the price of a good child is on the 4 trading day of the March 26th annual report to March 29th.

Is the market crazy?

Source: Fu Road Securities

Increase in non recurrent expenditure to offset revenue increments

Of course, investment can not be superficial. First of all, we need to find out whether a good child has spent "Wrongful money" and make sure whether the market has lost his mind.

According to wisdom

APP's understanding is that the increase in fees and taxes during good children is mainly influenced by the 3 non recurrent expenses of the company in 2017.

Related costs of mergers and acquisitions.

In October 23, 2017, a good kid bought a Oasis Dragon Limited100% stake in the good brother of China under the total cost of HK $3 billion 412 million.

About $120 million is paid in cash and the rest is paid in the form of new shares.

Good children disclosed in the annual report that the acquisition cost 44 million 833 thousand yuan.

Except that the issue of new shares should directly account for the incremental cost, all other paction costs have been tied up and included in the administrative expenses of the consolidated income statement.

The provision for Toys "R" Us (toy R & D) or bankruptcy clearing house is about 22 million 700 thousand yuan.

It is understood that Toys R & D is one of the world's largest toy retailers and one of the good kids. Due to the dilemma of toys, the city announced in March 15, 2018 that the company will "shut down" in 735 stores in the United States, and the company will close or sell these stores.

In the future, Toys R will face bankruptcy and liquidation.

3. the one-time deferred tax assets adjustment resulting from the US tax reform implemented in December 2017 is about HK $21 million 200 thousand.

The company disclosed that if the one-time cost was excluded, the adjusted shareholders' profit should be HK $296 million, up 32.7% over the same period last year.

It seems that good children did not spend money in 2017, but this does not overturn the conclusion that the company has made a loss of gain in order to grow in performance.

The key point is whether these non recurrent expenses of the company can bring good performance growth to the company in the future.

So the key to the problem is to focus on the acquisition of Oasis Dragon at the end of 10 in 2017.

Oasis Dragon has strong profitability or substantially improved company performance.

According to the understanding of APP, Oasis Dragon has achieved good performance in the past few years. In 2016, the company achieved a revenue of 1 billion 937 million yuan, a net profit of 100 million yuan, and a net interest rate of 5.16, while the good boy International's net interest rate in 2016 was only 3.4%.

In the first four months of 2017, the profitability of Oasis Dragon increased further, with net interest rates reaching 7.7%.

Good children pointed out in the 2017 annual report that if the acquisition of Oasis Dragon Limited occurred in early 2017, the company's annual revenue in 2017 will reach 8 billion 626 million yuan, with a profit of 388 million yuan, that is, the company's revenue will grow 38.28% compared to the same period last year, and the profit increased 83.2% over the same period last year.

In 2018, with the expectation that good children will not continue to produce such one-time expenditure, Oasis Dragon also brings good performance increments. It is also reasonable for the market to give children a higher valuation.

The growth of the main business is strong, and the second child helps the company open up its growth space.

It is worth noting that Oasis Dragon is engaged in retail business, so it has strong profitability, and to a certain extent, it also reflects that the market has a strong demand for good children products.

In 2017, the retail sales of good children achieved 6 billion 39 million yuan, an increase of 20.5% over the same period last year.

Among them, the growth in Europe, Africa, the Middle East, the Americas and the Asia Pacific region reached 38.2%, 1.4% and 27.1% respectively.

China

In 2017, the income of good children's own brand and retailer brand in the Chinese market was 1 billion 681 million yuan, an increase of 45.4% over the same period last year. According to the brand calculation, the GB brand of the company increased by 24% (RMB in 25.7%), and the growth rate of Cybex and brand was 100.8% (102.6% in RMB).

The Happy Dino brand was restructured in 2017, resulting in a slight decline in sales, and the brand will be reopened in 2018.

According to Zhitong finance and economics APP, good children have achieved strong growth in China's regional revenue, and the second child in China.

There is a close relationship, and the implementation of the second child policy will also contribute to the growth of the company's future performance.

It is reported that with the full opening of the second child, China formally bought fourth baby boomers.

In 2016, the birth rate of China increased to 12.96%.

It is estimated that the number of newly added population will reach 21 million 100 thousand, 21 million 890 thousand, 20 million 770 thousand, 1936 million and 16 million 890 thousand per year in 2017-2021 years, of which two children are expected to be 3 million 400 thousand, 4 million 640 thousand, 4 million 30 thousand, 3 million 530 thousand and 1 million 600 thousand.

It is estimated that China's population aged 0 to 4 will reach 98 million in 2020.

According to Frost&Sullivan data, the sales scale of baby products in 2016 increased by 14.2% to 367 billion 100 million yuan over the same period, with an average annual compound growth rate of 15.2% over the next 5 years.

The growth rate of children's durable goods in the future will be more than 14% per Annex s annually. It is expected to exceed 62 billion yuan in 2021. The annual growth rate of non durable goods will exceed 15.2% in the next 5 years.

This will undoubtedly bring enough space for children to grow in the market.

In addition, a good child in 2017 set up a wholly owned Affiliated Companies with a local distributor in Japan to build an integrated distribution network in Japan, and set up a new task force as a platform for all brands in Southeast Asia. This initiative will further expand the target market and expand the channels of Southeast Asia, thereby increasing revenue.

On the whole, the growth of good children in 2018 is related to table + brand re listing.

Expansion and other factors are multi wheel drive, and the company's performance in 2018 is even longer.