Lower than expected in the first half of 2018

Galaxy Electronics announced 1H18 results: operating income was 720 million yuan, down 3.43% from the same period last year; net profit belonging to the parent company was 73.69 million yuan, down 18.89% from the same period last year. The company disclosed performance guidelines: the first three quarters of 2018 is expected to achieve a net profit of 105 million yuan to 158 million yuan, YoY-20%~+20%.

Keep blowing against the wind. 1H18's revenue and net profit decreased compared with the same period last year, gross profit margin YoY-1.1ppt, net profit margin YoY-2.0ppt, mainly due to: 1) set-top box revenue YoY-11.72% to 329 million yuan, gross profit margin YoY-4.40ppt to 11.83%; 2) intelligent mechanical and electrical revenue YoY+12.91% to 337 million yuan, gross profit margin YoY-3.03ppt to 46.14% 3) income from key parts of electric vehicles YoY-18.96% to 37 million yuan, gross profit margin YoY+3.30ppt;4) sales expenses YoY+22% (product installation and maintenance service fees increase); 5) management expenses are basically flat; 6) asset impairment loss YoY+247% to 8.4 million yuan (bad debt loss increased by 1.39 million yuan, inventory loss increased by 3.53 million yuan).

Trend of development

The performance inflection point still needs to be observed. 1H18, the company further enriches and expands the product categories of military intelligent mechanical and electrical equipment and management systems to consolidate its leading position; further expands the scale of intelligent manufacturing of structural components, consolidates and expands the customers of automotive mainframe factory, studies the processing technology and structure of high strength and lightweight materials; continues to verify the reliability of electric air conditioning compressors and actively open up mainframe factory customers; charging and power supply business continues to develop to vehicle and module products. Looking forward to 2H18, we need to pay continuous attention to the mass production and delivery of electric air-conditioning compressors, the market development of vehicle power module products, the cost control of set-top box and the recovery of accounts receivable of 987 million yuan.

Profit forecast

Adjust the income and gross profit forecast, and lower the 2018-19 net profit forecast by 9.4% to 205 million yuan / 250 million yuan, YoY+9.4%/+21.9%.

Valuation and suggestion

At present, the company's share price corresponds to 21.6x/17.7x 18amp 19e Pmax E. Recently, the valuation center of A-share investors participating in the army has generally moved downwards, and we have lowered the target price by 42% to 4.20 yuan, corresponding to 23x/19x 18Compact 19e Pachet E, which has a potential increase of 7% and maintains a "neutral" rating.

Risk

Uncertainty about the progress of business transformation and upgrading.