Zhou Hei Ya International (1458) H2 2017 earnings summary

Executive summary

• 2017 revenue reached CNY 3.249bn, up 15.4% YoY; profit before tax was CNY 999m, up 3.7%, and net profit rose 6.4%.

• Adjusted net profit increased 4.8%; management described 2017 as a transformation period and prioritized healthy, sustained growth over a specific 2018 target.

Financial highlights

• Gross profit was CNY 1.98bn, up 12.8% YoY; net profit margin declined slightly, reflecting heavier marketing investment and membership benefits.

• Selling and distribution expenses rose 35% to CNY 948m, driven by delivery platforms, advertising, store rent and sales staff remuneration.

• Average price faced downward pressure from marketing and membership offers; management said pricing should remain at the current level and emphasized campaigns beyond discounts.

Outlook and guidance

• 2018 revenue was expected to increase while maintaining a growth rate similar to 2017; management gave no precise growth forecast.

• E-commerce was expected to maintain its 2017 growth rate; crayfish sales were expected to grow several times versus 2017, subject to consumer feedback and product development.

• 2018 priorities: expand existing and new regions, develop products and technology, strengthen membership through big data, integrate industrial resources and recruit talent.