The Second Quarter Results Are Basically In Line With Expectations.

The company 2016Q2 achieved 490 million yuan (-0.1%) in the single quarter, and realized a net profit of 74 million 900 thousand yuan (-23.3%), and its performance basically met expectations.

Income stabilized, the main industry recovery into a smooth channel.

Company 2016H1

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Accessories and accessories achieved 450 million yuan (+3.6%), 560 million yuan (-2%) and 11 million 977 thousand yuan (-20%) respectively, and the corresponding gross profit margins for clothing, shoes and accessories were 47% (-1.4pp), 40% (-4.7pp) and 26.4% (-7pp) respectively, with a gross gross margin of 42.9% (-3.2pp).

The change of performance comes from: 1) continuous adjustment of the terminal.

The company closed 354 retail outlets in the first half of the year, and 202 new retail outlets.

As of 2016H1, the company has reached 4313 terminals, including 4 direct outlets, and a total retail area of 340 thousand square meters. Among them, there are 131 new retail outlets for 2106Q2 dealers, 206 retail outlets for distributors, and 2 for rational control of inventory.

As of 2016H1, the company's inventory dropped to 110 million yuan (-17.1%), the decline in inventory prices returned to 18 million 70 thousand yuan, the main industry showed signs of weak recovery, 3) government subsidies significantly reduced.

The company 2016H1 received a government subsidy of 399 thousand yuan, a decrease of 19 million 704 thousand yuan compared with the previous period, resulting in a decrease in net profit to its mother.

Sports investment continues to expand.

1) the continuous layout of the industrial fund.

The company has invested 16.11% stake in huppu and invested in sports capital with huppu sports. The first phase has invested in 14 projects, including "understanding the ball", "intelligent sports ground", "salt fish game", "ZEEP", "fun sports" and so on. At present, it has set up second competing domain production funds, focusing on investing in the emerging industries and growth firms of China's sports industry. As of now, the company has invested 100 million yuan in the competitive field, and 2 has entered the sports insurance.

The company and Xiamen Rong a network technology jointly invested the establishment of an insurance broker, the company has embarked on the field of sports insurance layout.

Earnings forecasts and ratings: regardless of the impact of Jay's trip and the increase and dilution of the company, taking into account the decrease in business income this year and the recovery in performance, we downgraded the company's earnings forecasts. The 16-18 year EPS was 0.57, 0.66 and 0.74 yuan, respectively, corresponding to PE 45, 39 and 35 times.

We gave the company 57 times PE in 2016 and a reasonable stock price of 32.49 yuan in 2016 to maintain the "buy" rating.

Future investment points: 1) the layout of the company's football brokers, campus sports and sports big data is gradually landing, synergy effect appears; 2) integrate channels to create "multi brand, multi market, multi-channel" industrial layout.

The company has invested 380 million yuan to increase its investment in holding about 50% of its shares, and the effect of channel integration can be expected.