First quarter results Daphne slight decline

After the year-on-year increase of 22.8% year-on-year, Daphne was not able to win.

The company announced a few days ago that the core brand business of the Group saw a slight decrease of 2.5% year-on-year in same-store sales in the first quarter of this year. Although the sales trend has gradually improved in the early spring, the poor weather in late March affected the sales momentum of spring products, and the average selling price during the period was only slightly lower than that of the same period of last year.

Daphne said that the group still has confidence in consumer demand will gradually rise this year, especially when the government measures to stimulate domestic demand will play a role later this year.

Data show that Daphne's first quarter of this year, a net increase of 100 sales points, including the addition of 127 stores, close 27 stores, as of the end of March the core brand sales of a total of 6469.

In its 2012 performance announced not long ago, the company achieved revenue of 10.5 billion Hong Kong dollars in 2012, an increase of 22.8% year-on-year; net profit of 950 million Hong Kong dollars, an increase of 2.4% year-on-year; inventory, the value of goods reached 2.37 billion Hong Kong dollars, year-on-year Increased by 15%.

Daphne’s sales fell in the first quarter, apparently affecting the expectations of all organizations for this year.

The Bank of America Merrill Lynch said that Dafner’s same-store sales fell 2.5% year-on-year in the first quarter, which was lower than expected. It is expected that the same-store sales growth in the second quarter is still unlikely to rebound significantly. The Bank of America Merrill Lynch predicts that Daphne’s performance will improve in the second half of the year and expects demand to resume. Under the policy of “decreasing prices”, gross profit will gradually improve. With stable gross profit, cost savings and more sales in second- and third-tier cities, Daphne’s annual performance will outperform its peers. The target price was reduced from HK$11.1 to HK$10.8 and the rating was “buy”.

Guotai Junan issued a report saying that it will reduce its fully diluted EPS forecast for 2013-2015. Under the background of a 9% increase in the same store in 2012, the diluted earnings per share only increased by 1.4%. It is expected that the company will face the pressure of operating leverage contraction this year, so downgrade the company's rating to “reduce” and cut the target price to HK$7.87, which corresponds to 13.5x and 15.0x 2013 basic per-share earnings ratio and fully diluted per-share stock-to-equity ratio.