Lower-than-expected performance in 2018
The company's 2018 performance: the operating income was 83.4 billion yuan, up 7.4% from the same period last year; the net profit belonging to the parent company was 323 million yuan, down 9.3% from the same period last year. Considering the retroactive adjustment brought about by the acquisition of military industrial enterprises, the company's revenue rose 6.7% year-on-year in 2018, while its net profit fell 8.6% year-on-year. 4Q18's operating income was 25.5 billion yuan, up 10.2% from the same period last year, while the net profit attributed to the parent company was 118 million yuan, down 37.6% from the same period last year. The dividend per share is 0.022 yuan, with a dividend rate of 31.42% in 2018. The profit of the company's color TV and compressor business is lower than we expected, resulting in a lower net profit than we expected.
Competition in the color TV and compressor industry is fierce, and profits have fallen sharply: 1) 2018 color TV domestic price war is fierce, the company's color TV revenue is down 6% from the same period last year, and profits are down 116 million year on year.
2) the compressor business is affected by the rising price of raw materials and overcapacity in the industry, and the profit of intermediate products decreased by 255 million in 2018 compared with the same period last year. 3) the revenue of the refrigerator and air conditioning business increased by 5%, while the profit decreased by 43 million, mainly affected by the adjustment of settlement methods and the slowdown in demand in the 2H18 industry. 4) the income of the military industrial enterprises acquired by the company increased by 17% compared with the same period last year. In 2018, the company contributed 1.2 billion yuan in income and 130 million yuan in profits. 5) in addition, the revenue of the real estate business in 2018 increased by 108% compared with the same period last year, and the profit increased by 200 million yuan.
Trend of development
Look forward to the introduction of home appliance consumption stimulus policy: 1) since 2019, the government has repeatedly emphasized the introduction of home appliance consumption stimulus policy, the history of home appliance subsidy policy has benefited the color TV market, but only Beijing has introduced the relevant subsidy policy. On April 17, China Finance reported that the central government is expected to participate in supporting the "trade-in" of household appliances, and the intensity of subsidies is worth looking forward to. 2) the value-added tax rate of the industry has declined 3ppt since April 1, but the price war in the color TV market is fierce, and we expect that the profit space brought about by the drop in the tax rate will be difficult to retain within the enterprise. 3) as the contract manufacturing enterprise of XIAOMI White Power, if the sales of XIAOMI's white power products grow in the future, the company is expected to benefit from the order growth.
Profit forecast
Although the performance is lower than expected, considering that the home appliance subsidy policy is expected to improve the company's performance, it maintains the 20-year EPS forecast of 2019. 11 yuan / 0.12 yuan.
Valuation and suggestion
Maintain a neutral rating. Sector valuations rose, raising the target price by 36 per cent to Rmb3.82, corresponding to 35x/31x 2019Universe 20e Ppectus E, a 5 per cent increase compared with the current share price. The current share price of the company corresponds to 33x/30x 2019 Universe 20e P Unix E.
Risk.
Competition risk in color TV market.