Pioneer Xincai released its 2014 results KuaiBao: it is expected that the 2014 annual performance will increase by about 20% RMB50%, with a profit of 26.2615 million yuan to 32.8269 million yuan (the company made a profit of 21.8846 million yuan in 2013). The impact of non-recurrent profit and loss on net profit in 2014 is about 2.84 million yuan, which is relatively small.
KRS is included in the consolidated statement, and we believe that KRS's performance has made a small contribution to the company this year. KRS was incorporated into the company's merger in the fourth quarter of this year, in line with our expectations in the review of our three quarterly reports. As there is only one quarter of performance contribution, and the company is currently further optimizing KRS's procurement channels, financing management, advertising expenses, etc., we do not think that KRS's performance in the fourth quarter of 2014 (corresponding to the second quarter of KRS's fiscal year 2015) will not be significantly improved, and taking into account the merger and acquisition expenses (various intermediary fees, financing interest) arising from this year's tender offer for KRS, the company's net profit has been reduced. Therefore, we judge that KRS contributes little to the company's performance for the whole year, and may even drag down the company's performance.
There are two main points for the company next year: the substantial improvement in KRS performance and the release of production capacity for fund-raising projects.
Point one: the performance of KRS has improved significantly, and the exchange rate brings performance flexibility. KRS is Australia's oldest brand, as a shade material and window decoration company, in the past, the profit model was mainly based on store sales. In recent years, due to the impact of procurement costs, financing costs, advertising costs and so on, the company's profitability has declined significantly. We have looked at historical data and found that the best profitability in the history of KRS was about A $10 million. Before the acquisition, KRS's performance was only about A $1 million. We believe that there may be a significant improvement in the company's performance in the future, coupled with the impact of the exchange rate at 1:5, we believe that the performance flexibility brought about by the consolidation will be very great.
Point two: the production capacity of fund-raising projects is gradually released. Since the listing of the company, it has expanded its production capacity and used super-raised funds to invest in projects such as the integration window. According to the investment progress, we expect further release of production capacity next year, which will lead to an improvement in performance.
Maintain a "buy" investment rating. We do not adjust the original profit forecast model for the time being (the original valuation model does not take into account the performance improvement and financial expenses brought about by the consolidation of KRS), and the company's EPS from 2014 to 2016 is expected to be 0.21,0.27,0.32 yuan, maintaining the "buy" investment rating.
