For 1H08, the company reported operating revenue of Rmb5.124bn (+20.45% yoy), operating profit of Rmb295mn (+48.43% yoy), net profit attributed to parent of Rmb199mn (+68. 34% yoy) and EPS stood at Rmb0.51.
Edges of the company indicate two factors as below: 1) National chain strategic layout has been basically realized and stores of each region are to some extent in growing period. According to interim report, store sales growing have been in a mature or accelerating period in north China, northwest and southwest China and have gained dominating edges in these regions. Sales growth performance has experienced common situation in central south China (namely, Wuhan, Shenzhen, Changsha, etc.), however, stores in these regions focused on future national strategic layout, it is of great significance in case of no drastic decline in Nanjing Department Store. 2) As one of the companies sharply expanded in China, Beijing Wangfujing Department Store began to stress on competitiveness of endogenous growth, and has achieved united purchase. It will conduct nationwide promotion to major suppliers, besides, administrative capacity greatly stood out. Recently, its expenses constantly dropped, of which selling rate and management fee rate decreased 0.50ppt and 0.34ppt to 9% and 3.6% respectively.
Performance was basically in line. We maintain EPS 08-10E of Rmb1.11, Rmb1.45 and Rmb1.90 respectively unchanged, implying PE of 33x, 25x and 19x based on closing price last Friday, the estimation was of high level in domestic department store shares. However, being one of the few companies gained great achievements in nationwide expansion; Beijing Wangfujing Department Store has huge extension growing space. We hold “overweight” rating for the counter.