Results came in roughly in-line. Wumart’s FY11 total revenue rose 15.1% to RMB 16,396m, represent 97.8% of our estimate; shareholder’s profit rose 10.6% to RMB 586m; EPS was RMB 0.46, if exclude the disposal and impairment losses of Tianjin Lotus and Chao Shifa business line, the EPS was RMB 0.51, was 97.2% of our estimate.
Expansion missed target in FY11 but will speed up in FY12. Wumart targeted to open 15-20 superstores (actually opened 10) and 50 mini-marts (actually opened 40) in FY11. It delayed the openings of some stores to FY12 due to focused more on the continuous integration of MerryMart in 2H11; with the consolidation come to an end, the expansion is expected to speed up in FY12. Management guided to open in total 80 stores (inc. 20 superstores) in FY12.
SSS growth and guidance outperformed peers. FY11 SSS growth reached 9.8%, which was outstanding among peers. The management guided the FY12 SSS growth to be around 8%, which also beat most of the peer companies.
We introduce FY14 EPS forecast which is RMB 0.901 and trim down our EPS forecasts by 8.1% and 6.4% respectively for FY12 and FY13 on FY11 results and slower retail point expansion. However, we see the compan y is facing limited downside risks in FY12 and we think the sector valuation will rise in 2H12, thus maintain “Accumulate” and target price of HK$ 19.85. TP translates to a 27.5x FY12 PE, 22.4x FY13 PE, 5.6x FY12 PBR, 4.9x FY13 PBR, representing a 1.2x FY11 - 14 PEG.