Brief performance review
In 2018, the company achieved revenue and net profit of 1,975 million yuan/176 million yuan respectively, up 10.30%/7.01% respectively over the previous year, and achieved an overall dilution of EPS of 0.13 yuan, slightly lower than market expectations. The 2018 distribution plan is to distribute a cash dividend of $0.65 (tax included) for every 10 shares.
Management analysis
The main business structure was optimized, and revenue and profit growth gained momentum again. The revenue from the main business increased 11.13% year-on-year in 2018 and remained stable quarter by quarter. Under the double pressure of the international piano market and the domestic market, the company laid out popular, medium and high grade markets, achieving total sales of 156,000 pianos, an increase of 7.74% over the previous year. Among them, sales of the high-end Caeserburg series increased 13.27% year on year, and 3,543 pianos were sold online, up 18.53% year on year. In 2018, on the basis of the original marketing network, the company further strengthened the complementarity of resources with Schimmel, introduced its sub-brands for domestic production, and strengthened the domestic marketing network. In 2018, the brand sold 7,671 pianos in various series, including 1,782 pianos native to Europe and 5,889 sub-brands sold.
Actively invest in the emerging digital piano market and strive to seize opportunities. The holding subsidiary Emerson Digital Piano sold more than 40,000 units and continues to rank among the top digital piano companies in China, successfully developing a fourth-generation DSP advanced sound dual-core system sound source and an 88-key autonomous keyboard. On April 4, 2018, Emerson was listed on the New Third Board, becoming the first stock in the Chinese digital musical instrument industry. By the end of 2018, Emerson's net book assets had greatly increased during the mixed reform of the company before listing. Digital piano inventory fell 46.92% year over year by processing some sluggish materials.
Online education, such as music and cultural services, is in the blue ocean stage, and income and profit are improving. The share of cultural service revenue gradually increased, and revenue also increased by 33.34% over the same period last year, and gross profit continued to reach new highs, up 19.27 pct over the same period last year. In order to promote the construction of art education networks and build an art education brand, the company has set up direct education stores in Beijing, Guangzhou, Foshan, Fuzhou and other places. At the end of last year, the company had 645 art education franchisees, including 309 art classroom franchisees and 336 course series franchisees. The company signed a strategic cooperation agreement with Poly and Hale Education to cooperate in the fields of art education and training, musical instrument sales, art and culture activities, etc., to jointly promote the popularization of music and culture education.
Profit forecasting and investment advice
On the basis of strengthening the piano business, the company is actively expanding the cultural education industry, striving to strengthen the main piano business and expand the cultural industry. We predict that the company's EPS in 2019-2021 will be 0.17/0.20/0.24 yuan (three-year CAGR 22.2%), and the corresponding PE will be divided 44/37/31 times, maintaining the company's “buy” rating.
risk factors
Fundraising progress falls short of anticipated risks; industry competition intensifies risks; management risks of cultural industry expansion.
