Behind The Fall Of The Stock Market: 4 Billion 500 Million Deposits On The Account Are Continuously Financing.

Recently (May 28, 2019), the 31st degree (01361) announcement in Hong Kong announced that the company's president and major shareholder, Ding Wu, had increased 428 thousand shares of the company, with a total cost of HK $600 thousand.

Prior to that, Ding Wu also increased 2 million 692 thousand shares in May 23rd and May 24th.

The board of Directors believes that Ding Wu's stake in the company reflects its confidence in the company's future.

In fact, the current 31st degree is in trouble.

Since the end of September 2017, the share price of the company has fallen from HK $4.132 / share to HK $1.45 / share in May 28, 2019 (less than two years ago, or 64.91%).

At present, the market value of the company is about HK $3 billion (about 2 billion 500 million RMB), which is only about 45% of its net assets at the end of 2018.

What happened to the 31st degree share price crash?

31st degree encounter Waterloo: huge advertising expenses

According to the financial report, in 2018, the total revenue of 331% was 5 billion 227 million, a slight increase of 0.02% over the same period last year, and net profit was 304 million, down 33.48% from the same period last year.

Not only in 2018, but in recent years, the performance of the company has been in a doldrums.

Taking net profit as an example, the net profit of the company in 2018 was only 26.83% of that of six years ago (2011).

The picture shows the total revenue and net profit trend of the financial company's annual revenues of 31.

What is more noteworthy is that the sluggish performance of the 31st degree is still in the context of huge advertising expenditure.

In 2018, the advertising and publicity expenses of 331 degrees were 557 million, up 10.02% over the same period last year.

Advertising expenses account for more than 10% of revenue.

The main reason for the sluggish performance is that the domestic and foreign economic prospects in 2018 were full of uncertainties, which hit the confidence of enterprises and consumers, resulting in a weak consumer desire.

In fact, in recent years, the sports apparel industry in China is not weak, and its market is expanding.

Taking XTEP international, a sports apparel company as an example, the company's total revenue in 2018 was 6 billion 399 million, up 24.83% compared to the same period last year, and its net profit was 656 million, up 60.86% over the same period last year.

XTEP International said the company's performance in 2018 was mainly due to the fact that with the growing popularity of fitness and healthy lifestyles, there was no sign of slowing down in the sporting goods market. Retail sales were expected to catch up with retail sales over the same period last year, and consumer demand for sporting goods is increasing.

In fact, not only XTEP international, Anta sports, Lining and other sports apparel enterprises in 2018 also brilliant performance.

Lining's net profit in 2018 was 715 million, up 38.84% over the same period last year. In the same period, Anta sports net profit reached 4 billion 102 million, or 32.87%.

Closing over 2500 stores, brand remodeling is hard to say.

The continued downturn in performance has led to a continuous layoff of layoffs.

According to the financial report, by the end of 2018, the number of core brand stores was 5539, which was reduced by 269 compared with 5808 at the end of last year.

Compared with the number of 8082 outlets six years ago (end 2012), the number of stores decreased by more than 2543.

At the same time, the number of employees is decreasing.

In 2018, the number of employees was 7992, compared with 8555 last year, a decrease of 6.59%, compared with 2011, a drop of 20.11%.

In the context of declining performance, the brand reconstruction plan was launched at 31st.

In its earnings report, the company will solemnly release the brand remolding plan, and use brand driven approach to deal with the general trend of consumption upgrading.

Guo Yuan international research reported that the brand remolding plan of 31st degree is mainly to upgrade technology materials, supply chain coordination, and so on, aiming at the middle class group.

What is puzzling is that at the same time, the number of stores in the second tier stores is decreasing.

In 2018, about 74% of the stores were located in three or less cities in China, and 26% of the stores were located in China's first and second tier cities.

In 2017, the number of stores in the first and second tier stores accounted for 26.5%.

Account deposits exceed 4 billion 500 million, and the financial cost is as high as 200 million.

In fact, it is not just low performance and closed shop layoffs.

From the earnings report, there is still a drop in operating cash flow and a high level of receivables.

According to the financial report, in 2018, the net cash flow generated by the company's business activities was 295 million, a decrease of 64.55% compared with 832 million last year.

And two years ago (2016), the net cash flow of business activities was up to 1 billion 132 million.

At the same time, the company's receivables are increasing.

By the end of 2018, company receivables totaled 3 billion 120 million (of which accounts receivable was 2 billion 399 million), and accounts receivable accounted for 54.09% of the company's net assets.

It is noteworthy that the company's receivables are very low.

According to the company's assessment of recoverability of accounts receivable and receivables in 2018, the provision for bad debts was 1 million 200 thousand, and no provision was made in 2017.

In addition, there is still a huge amount of bank deposits on the account, but there is continuous financing.

According to the financial report, in 2018, the company's bank deposits were 4 billion 500 million, an increase of 895 million compared with the previous year.

In the year, its cash and bank deposits totaled 6 billion 478 million.

The picture below is a screenshot of the annual report of 31st 2018.

However, in the context of more than 4 billion 500 million of bank deposits, the company's financial costs remain high.

In 2018, the company's financial expenses amounted to 211 million, accounting for 69.4% of the current net profit.

In 2011, the financial cost of the company was even less than 1 million. In the context of the shrinking overall revenue scale, the financial cost of the 360 degree increase is bringing heavy pressure to the company.

In fact, the huge amount of cash and high financial expenses on the account may not only be so simple as to increase the financial burden of the company. The companies with the same problems in the A share market, such as Kang Mei pharmaceutical and Kang Dexin, have been widely concerned by investors because of their financial fraud.