Forecast profit is down 262% from the same period last year. 278%

Fenda Technology revised its 2018 performance forecast: it is expected to lose 7.2-790 million yuan in 2018, which is significantly lower than the previous forecast profit of 1000-50 million yuan, mainly due to the additional provision of Opunda impairment.

Opunda, which had a residual goodwill of 910 million yuan, lost more than 40 per cent of its revenue last year amid falling demand for metal parts for mobile phones and intensified competition. In the previous forecast, we have considered the provision of goodwill and inventory impairment of about 200 million each, and we estimate that this provision will add about 600 million and 100 million of Oppendar goodwill and inventory impairment respectively, that is to say, most of the goodwill has been provisioned and the inventory risk has been fully released.

Pay attention to the main points

The metal parts business is still unclear.

In recent years, due to the demetallization of the casing, competition for metal accessories for mobile phones has intensified. We estimate that Opunda's revenue fell by more than 40% last year. Although Opunda is looking for cars, medical care, smart door locks and other directions, there are still downside risks this year.

Fuchengda metal features are relatively good, the number of materials has increased a lot, we expect to further improve this year, but the fluctuation of iPhone sales will also partially affect the growth.

Smart speakers perform strongly

The company's speaker business performed well in 2018, and we estimate that the growth rate is close to 60%, which is also the biggest driving force for the company's growth. The high growth mainly comes from the volume of smart speakers, which accounts for about 60% of the overall speaker business.

We can see that the smart speaker market still has good growth potential this year. With the continuous progress of AI voice interaction, domestic Internet giants such as BATJ, mobile phone brands such as Huawei and Oppo, household appliance companies such as Haier and Skyworth, as well as some real estate manufacturers are competing to launch smart speakers. Funda Technology is one of the main contract manufacturers of smart speakers in China, and we expect the speaker business to grow close to 40% in 2019.

Valuation and suggestion

Considering the goodwill provision of Opunda, we reduced 18e EPS from 0.31 yuan to-0.35 yuan and 19e EPS by 3% to 0.23 yuan. The current share price is 3.84 yuan, which corresponds to 19e 16.6 times Pmax E. Considering that the trend of demetallization of mobile phone appearances continues, we maintain a neutral rating and a list price of 3.55 yuan, corresponding to 15.3 times Pmax E in 19 years, compared with the current downside space of 8%.

Risk

Mobile phone shipments downside risk, mobile phone metal appearance is facing the risk of being replaced.