Top-line came roughly in-line while earnings missed target. Revenue of Wumart rose 5.5% YoY to RMB 15,363.0m, roughly in-line. However, due to a quite unexpected loss in Tianjin of approx. RMB 40m, shareholder’s profit for the period of RMB 601.7m, a 2.7% rise YoY, ,represents only 93.1% of our full-year FY12 estimate. Moreover, the SSS growth of Wumart in FY12 was 2.1%.
Margins stable. Consolidated gross margin rose from 19.2% in FY11 to 19.5% in FY12, and despite of a challenging retail environment in 2012 and losses recorded in Tianjin market, net margin of Wumart dropped marginally by 0.1 ppt to 3.5%, which is still outstanding and more solid than most of the peers. We think the Company in FY12 has again demonstrated its pretty decent management ability and operating capacity; though the sales and distribution expenses to total revenue rose 1.0 ppt to 13.8% in FY12 compared to FY11, however the metric is still healthy.
Maintain “Accumulate”, raise target price to HK$ 15.82. Based on the FY12 results and outlook for future, we now estimate FY13-15 basic EPS to be RMB 0.532, 0.608 and 0.706 respectively. We are optimistic about the Company's logistics system, “Farm-Supermarket Links” program and detail oriented management, together with the expectation of improving integrated results and recovering sentiment, we maintain the investment rating. New Target price translates to a 23.5x FY13 PE, 20.6x FY14 PE, 4.1x FY13 PBR or 3.7x FY14 PBR.