Opunda wrote a large-scale impairment, the 2018 performance was significantly lower than expected, downgraded to neutral rating Fanta Technology issued a performance forecast, reducing the 2018 full-year net profit forecast from 1000-50 million yuan to-790 million to-720 million yuan, a sharp decline compared with 443 million yuan in 2017, lower than the market and our expectations It is mainly due to two reasons: first, the company's Opunda, which is engaged in the 3C structural parts business, has made an impairment of about 600 million yuan in goodwill and more than 200 million yuan in inventory impairment; second, the gross profit margin of each business is lower than expected due to the rising cost of raw materials. We downgraded the company's EPS forecast for 2019-2020 from 0.31,0.36,0.42 yuan to-0.36,0.25,0.30 yuan, downgrading to neutral rating. Considering that the competition pattern of mobile phone structure in 19 years is still unclear, we will suspend the coverage of the company and choose the machine to cover again after the fundamentals have clearly improved.
Smartphone penetration tends to be saturated, the competition pattern of 3C components deteriorates according to IDC data, 18Q4 shipped 375 million mobile phones worldwide, down 4.9% from the same period last year. According to the Ministry of Industry and Information Technology, the total domestic mobile phone production in the first 10 months of 18 years was 343 million, down 15.31% from the same period last year, thus it can be seen that smartphones are entering a stage of permeability saturation. In addition, due to wireless charging and the rise of 5G, mobile phones are undergoing an evolution from metal cases to glass and ceramic cases, resulting in a decline in metal CNC capacity demand. From the 18-year performance forecasts of big companies such as Changying Precision, Corson Technology and Jubilee Technology, it can be seen that the increasing competition in the industry has led to the deterioration of profitability. Based on this, we believe that after the completion of the factory relocation, the company's Opunda still needs mass production of new products such as e-cigarettes to drive the performance recovery.
The rising price trend of materials such as components has moderated, and the company's gross profit margin is expected to repair in 2019. Passive components such as MLCC and Chip-R experienced a large and long-term shortage in 2018, which put great pressure on the supply chain security and production costs of downstream manufacturing enterprises. according to the Fanta Technology report, the gross profit margins of the company's multimedia speakers and small household appliances are 17.73% and 22.82%, respectively. Year-on-year decline in 7.19pct, 9.9pct, which is also an important reason why the company's operating performance is lower than expected. However, since 18Q4, with the opening of the production capacity of passive components manufacturers in Japan, South Korea and Taiwan, as well as the inventory clearance behavior of some channel vendors, the inflection point in component prices has appeared. We believe that the gross profit margin of the company's terminal products in 2019 is expected to be repaired compared with 2018, alleviating the downward pressure on profitability.
Homepod sales are lower than expected, but the company is still working steadily with a number of high-quality customers in smart speakers. According to Strategy Analytics data, 18Q3 global smart speaker shipments reached 22.7 million, an increase of 19.7% over the same period last year. However, according to Slice Intelligence data, the sales of Apple Inc Homepod, which is highly expected, are lower than expected in 18Q1. We think this will affect the future investment enthusiasm of the industry chain to some extent. In 2017, Fanta successfully created popular products such as Tmall Elf and JD.com Ding Dong 2, and carried out stable cooperation in the field of smart speakers with Huawei, JD.com, BABA, bestbuy, Haier, Harman and Skyworth in 2018. We expect the company's speaker business to grow by more than 30% in 2019.
Downgrade the profit forecast to neutral rating according to the performance forecast
According to the company's annual performance forecast, we downgraded the company's 2018-20 return profit from 635 million yuan, 745 million yuan and 872 million yuan to-740 million yuan, 507 million yuan and 614 million yuan, respectively, and the EPS is expected to be-0.36 yuan, 0.25 yuan and 0.30 yuan respectively, downgrading to neutral rating.
Risk hint: goodwill continues to devalue risk; smart speaker penetration speed is lower than expected, competition intensifies resulting in lower gross profit margin than expected.