Selling Pants For The Same Time Slipped Nearly 18%.

601566.SH, an old menswear listed company known as "pants king", recently released its 2018 annual report and a quarterly report in 2019.

According to the data, 9 Mu Wang realized revenue of 2 billion 733 million yuan in 2018, an increase of 6.55% over the same period last year. The net profit of shareholders belonging to the listed company was 534 million yuan, an increase of 8% over the same period last year.

Despite the good performance, excluding the non recurring gains and losses of "selling stock" income and government subsidies, the net profit of the main business of King Mu was 361 million yuan, down nearly 18% from the same period last year.

This year, a quarterly report also showed the same situation.

Net profit attributable to shareholders of listed companies increased by 40.12% over the same period last year, but net profit after deducting non recurring gains and losses decreased by 17.11% compared to the same period last year.

What caused this contrast is the company's investment income, including stock returns and government subsidies.

Should we sell stocks or sell trousers?

The way of "trousers king"

Founded in 1989, the nine Mu Wang was developed from a "three no" garment factory with no factory building, no workers, and no technical personnel at the beginning of its establishment. It gradually developed into the nine Mu Wang company in March 2004.

And in May 30, 2011, the company's A shares were successfully listed on the Shanghai Stock Exchange (Stock Code: 601566), and the company entered a new development platform.

Nine Mu Wang has its own brand "JOE|ONE nine herding king", is a business casual men's wear brand enterprise, the core product of the company's nine men's men's trousers and jacket are loved and praised by consumers for many years.

According to GPLP rhino finance, the main business of King Mu is men's trousers, jackets, shirts and T-shirts.

From the annual report released in 2018 in April 25th, men's trousers and jackets are the main source of income for the nine farmers. Specifically, the sales revenue of men's trousers is 1 billion 123 million, accounting for 41% of the total revenue. The sales revenue of jackets is 749 million, accounting for 27% of the total revenue, and the income of shirts and T-shirts accounts for 11% of the total revenue.

Of course, men's trousers and jackets are also the main force of the profits of the nine Mu Wang.

Men's trousers account for 43.78% of the total profits, 25.87% of jackets and 11.73% and 11.20% of shirts and T-shirts.

Nine men's men's trousers are the main force of their income and profits, followed by jackets.

Therefore, the revenue and profit structure of the core business of King Mu can also be seen to be worthy of the name.

Next, let's take a look at the profitability of the nine herd kings.

According to the data, the gross profit margin of -2019 in 2011 is greater than 55%, which is obviously greater than 30%. This shows that the company has strong operating capacity, large profit margins and relatively large competitive strength.

Net sales in the past 8 years, although net interest rates fell from 2013 to 2014, and their performance has gone downhill, net profit has reached a minimum of 16.95% in 2014. But since the bottom of 2014, the net profit has gradually recovered, and net profit has increased year by year.

The net profit in 2018 reached 19.27%, and the net sales in the first quarter of 2019 amounted to 33.89%, indicating that the profitability of the company was relatively strong.

It can maintain stable gross margins and net interest rates.

But why is there a net profit growth of 40.12% in the first quarter earnings report in 2019, and the net profit fell by -17.11%?

Do you sell stocks or trousers?

According to the first quarterly report released in 2019 by King Mu in April 25th, the operating income in the first quarter of 2019 was 801 million yuan, an increase of 7.20% over the previous year. The net profit attributable to shareholders of listed companies was 271 million yuan, an increase of 40.12% over the same period last year. The net profit attributable to shareholders of listed companies after deducting non recurring gains and losses was 153 million yuan, a decrease of 17.11% over the same period last year.

The same goes for the 2018 performance of the company, although the net profit of shareholders who belong to the listed company is 534 million yuan, an increase of 8% over the same period, but the net profit is 361 million yuan, down nearly 18% compared with the same period last year.

What caused net profit and income to grow year-on-year, while the net profit declined?

Before explaining the reasons for these changes, let us first understand the net profit.

There are many ways to bring profits to the company, such as equity investment, financial subsidies, debt restructuring and so on, which are not related to the main business of the company, and do not affect the profits of the company.

Non recurring profit and loss means that there is no direct relationship between the occurrence of the business and the business, and although it is related to the business, but because of its nature, amount or frequency, it affects the income and expenditure that reflects the normal profitability of the company in a real and fair manner.

Net profit after deducting non recurring gains and losses is a simple indicator to reflect the performance of enterprises, excluding capital premium and other factors.

Only in this way can we correctly judge the quality of business performance.

According to GPLP rhinoceros finance and economics, the main reason why the shareholders of Kun Wang returned to the listed company is not matching the net profit and net profit.

The investment income of nine Mu Wang increased by 187 million 752 thousand and 300 yuan compared with the same period last year, an increase of 1270.02%, mainly due to the disposal of the Treasury's securities holdings. The return on fair value change was 56 million 788 thousand and 900 yuan lower than the same period last year, a decrease of 203544.44%, mainly due to the disposal of the Treasury's securities holdings, and the conversion of the fair value change proceeds to the investment income.

What is the source of investment returns?

Part of the investment income comes from government subsidies, and some from other comprehensive income subjects.

Other comprehensive income is the net amount of profits and losses recognized by the enterprise in accordance with the accounting standards of enterprises not deducted from profits and losses after deduction of income tax.

In business practice, other comprehensive income is usually caused by changes in book value of financial assets, such as stocks and bonds, which are not included in current profits and losses.

The change in the fair value of the financial assets that can be sold will immediately lead to a "false increase" or "decrease" in profits if the profits and losses are immediately recognized, but there is no actual cash inflow or outflow, only the price fluctuation in the capital market.

Once the sale and sale of financial assets belonging to the "other comprehensive income" are disposed of and sold, they will be pferred to the "investment income". The floating profit and loss of the book will become a real profit and loss.

As mentioned above, the main reason for the mismatch between net profit and net profit in the first quarter of 2019 is the change in the return on investment caused by the disposal of Treasury securities.

Moreover, the change of investment income accounts for a low share of net profit.

On the other hand, the amount of equity investment in the capital market is not unusual.

Equity investment is, of course, a means for companies to create profits, but the stock market risk is unpredictable. The profit of equity investment is also full of uncertainty. When controlling equity investment, companies must control the proportion of funds and pay attention to risk management.

Or do you concentrate on the main business?

This is a question worthy of consideration for the nine herd kings.