Main points of investment
Event: the company disclosed its annual report for 2018 and quarterly report for 2018: the total operating income in 2017 and the first quarter of 2018 was 668 million yuan and 118 million yuan respectively, an increase of 31.4% and 32.4% respectively over the same period last year, and a net profit of 12920 yuan and 11.37 million yuan respectively, an increase of 2.15% and a decrease of 34.30% over the same period last year. It decreased by 9.4% and 41.8% respectively compared with the same period last year. The company expects the net profit of returning home in the first half of 2018 to increase by 0% muri 40% compared with the same period last year, with a corresponding range of 64.88 million yuan to 90.84 million yuan. The company plans to pay a cash dividend of 4 yuan (including tax) for every 10 shares.
Comments:
The initial volume of the project channel, the extension of new categories, and the rapid growth of income. The company's Q1 revenue grew by 31.4% in 2017 and 32.4% in 2018, continuing the rapid growth since Q4 in 2016. we expect to benefit mainly from the initial volume of engineering channels and the increment of new categories such as MGRG plaster, integrated walls, home modules and so on. In terms of engineering business, from the data of the company's top five customers, Evergrande is expected to contribute 62.2 million yuan in revenue in 2017, driving revenue growth 12.0pct. In terms of new categories, gypsum, wall and home modules achieved a total income of 13.88 million yuan in 2017, driving revenue growth 2.7pct. Excluding the impact of the engineering end and new categories, the company's revenue growth in 2017 is still about 20%, reflecting the good performance of the retail channel, which is related to the adjustment and optimization of the company's channel and the expansion of the blank market. From the perspective of Q1 growth performance, in addition to the contribution of engineering channels, retail channels are also expected to maintain steady growth.
Gross profit margin has declined, expenses and new subsidiaries are a drag on performance. The company's consolidated gross profit margin in 2017 and the first quarter of 2018 was 45.39% and 40.56%, respectively, reducing 4.06pct and 5.09pct, respectively. We judge that the decline in gross profit margin is mainly affected by the increase in the proportion of engineering business and the rising prices of raw materials such as aluminum. In addition, the lower gross profit margin of the new category has also dragged it down. The increase in the intensity of expenses is also one of the reasons why the profit performance is lower than expected. The rates of the three items of expenses for the whole of 2017 and the first quarter of 2018 were 24.79% and 32.93% respectively, increasing 5.27pct and 4.21pct respectively over the same period last year.
Among them, the annual sales expense rate, management expense rate and financial expense rate in 2017 were 13.38%, 12.33% and-0.93% respectively, increasing 2.75pct, 1.72pct and 0.79pct respectively compared with the same period last year. The increase in sales expense rate is mainly due to the substantial increase in advertising expenses, and the increase in management expense rate is mainly due to the increase in R & D investment, personnel wages, welfare expenses and other factors, which are expected to be related to factors such as the new category being in the R & D promotion period. In the first quarter of 2018, the sales expense rate, management expense rate and financial expense rate were 14.54%, 19.24% and-0.85%, respectively, reducing 2.25pct, increasing 2.64pct and 3.82pct, respectively. We judge that the decline in the rate of sales expenses benefits from the adjustment of marketing investment, but the management expenses are caused by the increase in the company's research and development fees. The profit and loss of minority shareholders of the company in 2017 and the first quarter of 2018 were-3.01 million yuan and 800000 yuan respectively, indicating that the newly established subsidiaries since 2016 are still in a state of loss because the business is still in the initial period, which is also a drag on the overall profit of the company. It is expected that with the expansion of business, there will be improvement this year.
The risk of accounts receivable is well controlled, but the cash flow fluctuates. The balance of accounts receivable at the end of 2017 and the end of the first quarter of 2018 increased by 122% and 179% respectively compared with the same period last year, which is expected to be related to the accelerated expansion of the company's engineering side. However, the company's bad debt loss was only 1.51 million yuan in 2017 (down 10% from the same period last year) and zero in the first quarter of 2018, reflecting that the risk of accounts receivable was well controlled and had no adverse impact on performance. The net cash flow generated by operating activities in 2017 was 208 million yuan, an increase of 56.9 percent over the same period last year, but it was-65.72 million yuan in the first quarter of 2018, a decrease of 139.8 percent over the same period last year, which is expected to be related to the increase in stock preparation and the increase in the balance of accounts receivable.
Investment suggestion: we adjust our profit forecast and expect the company's net profit from 2018 to 2020 to be 169 million yuan, 231 million yuan and 308 million yuan respectively. The closing price on April 25 corresponds to 23, 17 and 13 times PE, maintaining the "buy" rating.
Risk hint: the real estate falls faster than expected, and the competition in the industry intensifies.
