Incidents:
According to the company's annual report, it achieved operating income of 291 million yuan in 2015, a year-on-year decrease of 5.23%; the return mother's net profit was 368.865 million yuan, down 24.23% from the previous year; EPS was 0.45 yuan; and it plans to distribute a cash dividend of 0.95 yuan (tax included) for every 10 shares to all shareholders.
Comments:
1. Performance was slightly lower than expected, and the transfer of exports to domestic sales of the main business continued to be adjusted
In 2015, against the backdrop of no significant improvement in the macroeconomic environment, sales of small gift products with a large number of companies and low unit prices increased, leading to a decline in operating income. At the same time, the company's channel layout gradually shifted to domestic, actively developing the middle and high-end domestic markets for fine products and gifts, and the share of domestic sales revenue rose to 35.76% from 23.2% at the end of 2014. We believe that daily-use porcelain products themselves are highly irreplaceable, and with the gradual improvement of residents' cultural taste, the domestic ceramics industry still has a lot of room for development, and the company's share of domestic sales revenue is expected to increase one step further in the future. Overall gross margin declined by 1.78 pct to 31.33%, and sales and management expenses ratios increased by 1.14 pct and 2.36 pct respectively, dragging down net profit.
2. Industrial funds open up transformation expectations and invest in early technology to open up e-commerce channels
The company set up the Guangdong Songfa Win-Win Industrial M&A Fund in the early stages, aiming to invest in equity mergers and acquisitions in emerging industries. At the end of last year, it joined Beizao Technology and entered the field of social e-commerce operations, seeking breakthroughs in five major functions such as distribution systems, mobile malls, product QR codes, user centers, and shopping mall counters, creating another important domestic sales channel, driven by interpersonal sharing and word-of-mouth marketing, forming a positive consumer loyalty cycle. We believe that after the establishment of the Industrial Fund, participation in Beizao Technology or the first step in the company's transformation, with abundant industry project resources and strong execution of its own, and after taking the first step, the company is expected to continue to transform in the next few quarters.
3. Maintain the “Cautious Recommendation - A” rating
We believe that the development direction of the company since its listing has been very clear. The main business has been transferred from export to domestic sales, and there is broad scope for social e-commerce development, and the establishment of the Industrial Fund marks a clear transformation. The Songfa Chuangying Industrial Fund is large and is expected to provide greater business support for the company's transformation. Furthermore, the company's shareholders also come from executives in the industry, who have a lot of business reserves in the fields of health, home, etc., which can provide reserve projects for the company's future business transformation. We expect EPS to be 0.55, 0.66, and 0.79 yuan respectively from 2016 to 2018, maintaining the “Cautious Recommendation - A” investment rating.
Risk warning: The export market continues to be sluggish, and the development of domestic sales business has fallen short of expectations.