In 2017, business income increased by 38.6% over the same period last year, while net profit from home decreased by 45.9% over the same period last year.
The company announced its 2017 results, KuaiBao, with an annual operating income of 960 million yuan, an increase of 38.6% over the same period last year, and a net profit of 70 million yuan, down 45.9% from the same period last year, which was lower than expected. Subsidiary Bo Han Weiye acquired Hongtu Chuangzhang and merged its annual results for 2017 (2016 for 2 months), resulting in a year-on-year increase in Hua Pengfei's total revenue in 2017. Due to the lower-than-expected performance of Bohan Weiye, which was acquired in 2015, the business performance declined due to a 310 million impairment in goodwill. The company's Internet of things new customers, mapping and other growth logic needs to be verified, based on the principle of caution to downgrade the company's profit forecast, downgrade to "neutral".
Impairment of goodwill affects operating profit
In 2017, Bo Han Weiye, which the company acquired in 2015, was affected by market factors such as the fast replacement of PDA handheld terminals, and customer demand fell short of expectations. As a result, the company made provision for 310 million impairment, resulting in a loss of 170 million yuan in operating profit. However, after increasing or decreasing non-operating income and expenditure, the company realized a total profit of 130 million yuan. We believe that the non-operating income is mainly the compensation made by Bohan Weiye in accordance with the performance compensation agreement at the time of acquisition. In addition, without taking into account the impact of impairment of goodwill, the company can achieve an operating profit of about 140 million yuan, including the contribution of the consolidated earnings acquired by subsidiary Bo Han Weiye to the performance of Hua Pengfei.
Bo Han Weiye's voluntary profit commitment shows confidence
Bo Han Weiye, a subsidiary of the company, voluntarily made a profit commitment in 2018 and 2019, deducting the non-return net profit of not less than 140 million yuan respectively. If the actual net profit at the end of the current period is lower than the promised net profit, Hua Pengfei will be compensated in cash to demonstrate the confidence of the subsidiary. However, considering that the performance promised by Bo Han Weiye in 2015 and 2017 has not been achieved, especially the professional logistics handheld PDA, one of the basic businesses, is gradually affected by the mobile phone + APP model, there is performance uncertainty and valuation is suppressed to a certain extent.
Traditional businesses have been hit by downgrades of profit forecasts and ratings
We are optimistic about the company's strategy to change to the Internet of things and "data operation", but considering that the landing progress of surveying and mapping and Internet of things projects is not as expected, incremental performance has not been contributed yet, and the growth logic needs to be verified.
Based on the principle of prudence, we reduce our performance forecast for 2018-2019 to $120,000,000 (the previous value is $182,222 million). With reference to the comparable company Wind, which is close to the company's market capitalization, the average 2018PE valuation is 27.4X, and considering that the company is engaged in surveying and mapping, big data business, there is a valuation premium over traditional logistics enterprises (30%). The PE valuation range of 2018E is 27.4-35.6X, lowering the target price to 6.28.1 yuan (the previous value is 11.94-12.89 yuan) and downgrading to "neutral" rating.
Risk hint: surveying and mapping, big data business continues to be less than expected, traditional logistics business shrinks.