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Beijing Toread Outdoor Products:Net profit dragged down by higher travel service business losses

发布时间:2016-08-22    研究机构:瑞银证券

Net profit down c24% YoY

In H116, Toread posted revenue of Rmb1.09bn (up 60.9% YoY), mainly due to theconsolidation of Eyoutour, part of its travel business. Net profit was Rmb90m (down23.9% YoY). H116gross margin fell 18.3ppt YoY to 33% mainly on the consolidationof the low-margin travel business (4.6%); selling/administrative expenses rose43.6%/86.3% YoY on higher expenses from the consolidation of Eyoutour and fourfranchisees. Total expense ratio rose 0.6ppt YoY to 25.3%.

Outdoor product gross margin down on destocking

In the outdoor product segment, revenue grew c1% YoY in H116, with the corebrands’ revenue down 3.2% while revenue from sub-brands Discovery and Acanu rose72% and 50% YoY, respectively. Gross margin on sales dropped 2.4ppt YoY due togreater inventory clearance; net profit fell c8.5% YoY to Rmb120m; end-marketexpenses increased sharply due to the consolidation of four franchisees acquired atend-2015. The company cleared Rmb730m worth of off-season outdoor product stocksin H1and is confident of cutting the segment’s inventories by 25% YoY in 2016.

Travel service business losses up

The travel service business posted revenue of Rmb410m in H116. However, thebusiness’ losses increased to Rmb16.3821m from a year ago as Eyoutour istransforming to a B2C platform and the lvye China plan is at the expansion stage. Sincelaunching the lvye China plan, the company has approached over a hundred clubs,reaching agreements with five clubs on strategic cooperation. The company looks likelyto sign contracts with nearly 10outstanding clubs by year-end.

Valuation: Maintain Neutral rating and Rmb17.3PT

We derive our price target of Rmb17.3based on a DCF methodology (7.9% WACC).

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