Performance summary: the company's 2018H1 achieved an annual operating income of 520 million yuan, an increase of 9.7% over the same period last year, and a net profit of 96.07 million yuan,-7.4% over the same period last year.
The revenue of 2018H1 increased steadily, and the increase in cost led to a slight decline in gross profit margin: in 2018, H1, the company achieved operating income of 520 million yuan, an increase of 9.7% over the same period last year, of which the revenue of electronic video business reached 279 million yuan, a decrease of 2.51% over the same period last year, mainly due to the decrease in sales revenue of ultra-high resolution digital splicing wall system in foreign markets. The revenue of preschool education business reached 240 million yuan, an increase of 28.27% over the same period last year, achieving steady and rapid growth. 2018H1 realized a net profit of 96.0669 million yuan, down 7.41% from the same period last year, mainly due to the increase in the sales proportion of LED products in the company's digital splicing wall business structure, and the decline of 4.41pct in the plate comprehensive gross profit margin. In addition, the company has increased its investment in the operation and management of kindergartens in the exploration of trusteeship joining mode, the team of professionals, the research and development of teaching products and the construction of intelligent preschool education platform, so that the operating cost of the preschool education industry has increased by 35.58% compared with the same period last year. The overall gross profit margin of the company has decreased by about 3pct, and the net profit margin has decreased by about 2.2pct.
The electronic video business develops steadily, and the leading position remains: 2018H1, the company's electronic video business achieved sales revenue of 279 million yuan, a slight decline of 2.51% compared with the same period last year. In terms of VW business-related products, the company continues technological innovation to maintain the market competitiveness of VW business products; in terms of display products, the company released a new generation of DLP display units using tricolor laser light sources. In terms of software and service business, the company aims at public safety, high-speed and financial industries, and ultra-high resolution visual command and dispatching software ViSmart, and has successively completed customized development, including the integrated software and hardware solution for the high-end intelligent distribution network of Beijing City Sub-Center, the visual comprehensive display platform for the development of Jinan Rail Transit Line R1, and remains in the leading position in the market.
The park takes the lead in coverage and has a significant advantage based on the middle and high end. The company is a leading kindergarten operation and management service provider in the country, with 6 chain kindergartens, 54 managed kindergartens, 3 cooperative kindergartens, 5103 joined kindergartens, 113special courses, 2 hosted primary schools, 3 brand-owned primary schools and 173brand-affiliated early education institutions. 2018H1 increased by nearly 200, ranking first in the industry. The company's hosting kindergarten is located in the middle and high end, concentrated in first-and second-tier cities, and has a significant first-mover advantage.
Hongying Education: 2018H1 Hongying Education achieves revenue of 93.37 million yuan and net profit of 12.5 million yuan (YOY-54.38%). The main reason for the decline in performance is that in the first half of the year, Hongying Education phased out the unconnected parts of the joining park, slowed down the development of Hongying long-time brand agents, and suspended the chain franchise business to reserve more high-quality customers; and Hongying launched a "new Hongying" project based on "managed joining" to explore high-end kindergarten trusteeship. At present, the "Xinhongying" project is still in the exploration incubation period, and the early cost investment and business strategy adjustment affect the profitability of the current period. At present, Hongying has 6 chain kindergartens, 1338 brand franchise parks (including 475 flagship parks), 3162 Hongying long Alliance Park, and 3162 Hongying long brand agents. It is expected that Hongying will adjust its strategy in the second half of the year, actively promote the hosting of new Hongying high-end kindergartens, adjust and promote the business development of traditional chains and long-standing alliances, and guarantee its annual performance.
Golden Cradle: 2018H1 Golden Cradle achieves operating income of 110 million yuan (YOY+24.28%) and net profit of 51.596 million yuan (YOY-8.2%). The reason for the slight decline in performance is that the number of employees and salary levels have increased significantly, and personnel costs have increased rapidly, laying a good foundation for continued business growth in the future. At present, Golden Cradle has a total of 24 kindergartens, 598 kindergartens, 2 primary schools and 3 brand primary schools, and 1 preschool center and 173 service centers. The promised performance in 2018 is 82.6 million yuan, which is expected to be completed.
Keer Education: in August 2017, the company acquired a 70% stake in Keer Education as an important layout of the middle and high-end market channels. During the reporting period, Keer Education had 19 kindergartens with a business income of 29.08 million yuan and a net profit of 21.11 million yuan. The committed performance from 2017 to 2019 is 38.46 million yuan, 44 million yuan and 53.28 million yuan respectively. Keer Education achieved a net profit of 42.33 million yuan in 2017, and it is expected that the performance promise in 2018 will be fulfilled.
Dingqi early Childhood Education: in July 2017, the company acquired a 70% stake in Dingqi early Childhood Education, a high-end early childhood education chain in Inner Mongolia, which is an important measure for the company to consolidate the offline layout and expand the regional layout of early childhood education. Dingqi Education has 19 kindergartens, including 11 trusteeship, 3 cooperative parks and 5 brands. The operating income is 13 million yuan and the net profit is 7.36 million yuan. The performance commitments of the target company from 2018 to 2020 are 14 million yuan, 16.8 million yuan and 20.16 million yuan, respectively. More than 50% of the performance commitments have been completed in the first half of the year. It is expected that the performance commitments will be fulfilled.
Profit forecast and rating. It is estimated that the EPS from 2018 to 2020 will be 0.24,0.31 and 0.36 yuan respectively. In the next three years, the net profit of homing will maintain a compound growth rate of 20% and maintain the "overweight" rating.
Risk hints: the risk of industrial policy change, the risk of increased market competition, the risk of business expansion or falling short of expectations, the risk of performance commitment or falling short of expectations.