Event:
Recently, we carried out a survey on the company and communicated with representatives about the management and development strategy, etc.
Our Analysis and Estimation
1. Stockroom-style supermarkets are expanding steadily in the province.
2. Convenience supermarkets and stockroom-style supermarkets complement each other.
3. To improve management efficiency by careful and intensive work.
4. Chongqing supermarkets have not eliminated deficits yet.
5. General merchandise business is subject to maintaining.
Investment Suggestion
“Recommended” rating maintained
As leading supermarket in the district, we deem that the company has large development potential. We predict compound growth rates of 2007-2010 operating revenue and net profit are 23.66% and 31.82%. According to DCF absolute valuation model, reasonable valuation of the company is Rmb10.76; while in terms of relative valuation, 2009 P/E ratio is 28x, with reasonable value of Rmb11.20. Thus, “Recommended” rating is kept.