Main points of investment
Juteng International released its 2017 interim results: as of June 30, 2017, the company achieved HK $3.748 billion in revenue, an increase of 1.4% over the same period last year, a gross profit of HK $561 million, an increase of 1.9% over the same period last year, and a net profit of HK $81.61 million, down 59.5% from the same period last year.
Revenue and gross profit are basically flat, and the industry is expected to improve gradually in the second half of the year. In an unfavorable environment where shipments of laptops / tablets continued to decline, the company still achieved 1.4% year-on-year growth in revenue in the first half of the year, while gross profit margin reached 15.0%, up 0.1 percentage points from the same period last year. It is expected that the decline in laptop shipments for the whole of 2017 will gradually narrow compared with previous years, and the company's revenue in the second half of 2017 is expected to be better than that in the first half.
Expenses are stable, and management expenses have increased slightly due to the implementation of equity incentives. In the first half of 2017, the total expenditure on various expenses was 431 million yuan, with an expenditure rate of 11.5 percent, an increase of 0.5 percent over the same period last year, and remained basically stable. Of this total, the management fee increased from HK $305 million to HK $332 million, mainly due to the implementation of the share award scheme during the period, resulting in a non-cash fee of HK $18 million.
Non-recurrent profit and loss fell sharply, which had a great impact on the overall performance. In the first half of 2017, due to: 1) the government subsidy dropped to HK $25.46 million from HK $105 million in the same period last year, the profit warning announcement had been disclosed; 2) due to the appreciation of the RMB, the company's exchange profit and loss dropped from HK $53 million to a loss of HK $27 million in the same period last year. Taken together, the non-recurrent profit and loss decreased by about HK $160 million compared with the same period last year, which had a significant impact on net profit.
The cash position is good and the debt ratio is healthy. The company's cash flow from operating activities in the first half of 2017 was 493 million Hong Kong dollars, down 47.0% from the same period last year. In addition to an increase in inventory caused by the launch of new products at the end of the second quarter, it was mainly affected by a decline in net profit caused by non-recurring profits and losses. The company has HK $1.711 billion in cash and equivalents on hand, up 11.9% from the beginning of the year; the borrowing ratio is 30.9%, which is basically the same as at the beginning of the year, and the overall asset position is still healthy.
Investment advice: Bloomberg unanimously expects that the company's EPS in 2017 and 2018 will be 40.6 PE 48.4 cents respectively, with an average target price of HK $3.45, corresponding to 7.1x PE in 2018.
Risk hint: competition from companies in the same industry, government subsidies continue to reduce, RMB appreciation.