Huangshi Group met expectations
Huangshi Group announced 2016 results: operating income of 2,446 million yuan, up 45.2% year on year; net profit attributable to parent company was 291 million yuan, up 57.4% year on year, corresponding to profit of 0.35 yuan per share. In addition, the company announced its 2017 quarterly report, with operating income of 454 million yuan, a year-on-year decrease of 2.42%; net profit attributable to the parent company was 167 million yuan, an increase of 2.79% over the previous year; the company expects net profit attributable to the parent company from January to June 2017 to 131 million yuan, an increase of 0.00% to 30.00% over the previous year.
Development trends
1. The 2016 performance was basically in line with expectations, and the main business structure was further transformed into media. The company's revenue and net profit both grew steadily year on year in 2016. Among them, the revenue of the film and television production and advertising media sectors increased by 83.89% year-on-year, accounting for 34.44% of revenue in 2016 (+7.25pct), and the main business structure was further transformed into the media industry.
2. Excellent film and television content continues to be introduced, and Shengshi Hotsun's operating revenue needs to be increased. Huangshi Yujia, a subsidiary of the company, launched five TV dramas in 2016, with total revenue of 374 million yuan, accounting for 17.67% of the company's total revenue. At the same time, there are five shows that have been launched or are being prepared in the early stages, for a total of 230 episodes. The actual performance of Shengshi Jiaoyang, a subsidiary of the company in 2016 was 91.557,800 yuan, exceeding the promised performance of 90 million yuan; however, the realized operating revenue ratio was 38.22%, lower than the promised value of 16.87ppt.
3. The four business pillar models are beginning to appear, and inter-sector integration enhances the Group's competitive strength. In 2016, the company completed the acquisition of the remaining 40% of the shares in Perfect Online, and also invested in the mother and child cross-border e-commerce Premium Product Yuedong and SAAS platform Yilian Video. Future sector integration will further enhance the company's competitiveness.
Profit prediction
Due to the slowdown in the growth rate of traditional businesses such as dairy products, we lowered our earnings forecasts for 2017 and 2018 by 16% and 22% from RMB 0.54 and RMB 0.71, respectively, to RMB 0.46 and RMB 0.55.
Valuation and recommendations
Currently, the company's stock price corresponds to a price-earnings ratio of 24x/20x for 17/18. We maintained the recommended rating, but lowered the target price by 35.1% to RMB 13.50, which is 21.95% upward from the current stock price. We maintain recommended ratings. Considering the downward shift in the valuation center of the industry, we lowered the target price by 35% to 13.5 yuan. The target price corresponds to the 2017/18 price-earnings ratio of 29x/25x.
risks
Competition in the dairy industry has intensified, mergers and acquisitions have not met expectations, and there is a risk of business integration after capital operation.