Investment suggestion
The company released its 2017 annual report on the evening of March 28, with a total operating income of 11.295 billion yuan in 2017, an increase of 3.48% over the same period last year. The net profit attributed to shareholders of listed companies was-184 million yuan, down-130.12% from the same period last year. Net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses was-377 million yuan, down-165.93% from the same period last year. The company's revenue remained stable and increased slightly, but its profits fell sharply. The reason for the decrease in corporate profits is that some subsidiaries with weak anti-risk ability have made provision for impairment of goodwill and bad debts of accounts receivable. At present, the company still has a high goodwill balance, and the goodwill impairment pressure still exists. Combined with the company's complete layout of the integrated marketing and communication industry chain and big data business that conforms to the trend, while Shengguang still has strong advantages in terms of customers, technology and media, the company's performance is expected to resume growth after this substantial impairment provision, we predict that the company's EPS for 2018-2019 will be 0.22,0.26 yuan respectively, corresponding to the current stock price PE of 21x and 18x, respectively, maintaining the "recommended" rating. However, we still need to pay close attention to the operating conditions of the subsidiaries.
The company's revenue remained basically stable, and the traditional media pulled down the comprehensive gross profit margin.
The company's overall revenue in 2017 reached 11.295 billion yuan, a slight increase compared with the same period last year. In terms of business segment, the growth rate of traditional media agency income declined for the first time, achieving 6.076 billion yuan in revenue for the whole year, accounting for 53.79% of total revenue, while the digital marketing sector performed steadily, with revenue reaching 4.393 billion yuan. the proportion of total revenue jumped to 38.89% from 29.84% last year. The revenue of own media has also declined, which is greatly impacted by the traditional advertising market, but has little impact on the overall revenue because of its relatively low share; the revenue of other sectors is basically stable.
In terms of gross profit margin, the company's comprehensive gross profit margin in 2017 was 12.21%, down sharply from 18.12% last year, down 5.91 percentage points. The gross profit margin of the company's traditional media agents pulled down the comprehensive gross profit margin by only 3.52%, down 9.41 percentage points from the same period last year, mainly due to the poor risk resistance of some traditional media subsidiaries. revenue declined while costs could not be reduced because of the characteristics of media procurement. The gross profit margin of the digital marketing sector also declined, to 16.14% from 19.35% last year, a small gap compared with other companies in the industry, mainly due to consolidation and new customers.
The company's cost structure is relatively stable. Non-recurrent profit and loss, including the disposal of subsidiaries Shanghai Yarun and Guangzhou Zhongmao part of the equity investment income of about 160 million yuan. This part is the reason why there is a large gap between the company's net return profit and deduction non-return profit.
Due to the pain of the transformation of traditional media, the weak anti-risk ability of some subsidiaries has maintained the basic stability of the parent company's business, especially in the field of digital marketing, which can generally meet or exceed expectations. however, the business of some traditional media subsidiaries is a drag on performance. In the semi-annual report and three quarters report, the company has announced that the performance of its subsidiaries Kaida and Yarun are not up to expectations and need to be tested for impairment. After that, the transfer of Yarun's shares will no longer be consolidated. The announcement at the time of the performance of KuaiBao also increased the impairment of the goodwill of Provincial Vanguard and Hezhong. After the impairment of goodwill, the company's goodwill balance is still about 2 billion, Kaida also has about 150 million goodwill balance. The risks of mergers and acquisitions still need to be paid attention to. At the same time, the company allocates bad debts to these subsidiaries and some accounts receivable with high risk characteristics. The asset impairment of these two parts amounts to 680 million yuan, which greatly affects the profits of the company.
Risk tips: subsidiary business risk, goodwill impairment risk, core customer loss, macroeconomic slowdown, integration effect is lower than expected, big data platform construction is not as expected and so on.