Brief comment on performance
In 2018, the company achieved revenue / return net profit of 527 million yuan / 55 million yuan respectively, an increase of 12.30% and 33.02% respectively over the same period last year, and the fully diluted EPS was 0.21 yuan, which was basically in line with expectations. In 2018, the company plans to pay a cash dividend of 0.35 yuan (including tax) to all shareholders for every 10 shares.
Business analysis
Brand promotion helps the company to achieve steady growth in all categories. In 2018, the company will strengthen brand promotion through music exhibition and piano recommendation, actively develop second-and third-tier cities, and constantly tap sales market share, ranking second in China in terms of output, sales and exports. The company sold 38200 pianos, an increase of 3081 over the same period last year, and piano sales revenue increased by 13.52% over the same period last year. In 2018, the company sold 36500 upright pianos, with revenue of 420 million up 13.46% over the same period last year; grand piano sales reached 1727 units, with revenue of 52.0422 million yuan, an increase of 14.01% over the same period last year. On the other hand, the company complies with the trend of Internet sales, actively expand sales channels and promote the development of online e-commerce platform. In 18 years, the channel sold 2246 pianos, an increase of 68.24% over the same period last year, and an increase of 30.7349 million yuan in income, up 56.41% from the same period last year.
Price increases and smart products are good for gross margins. Due to the increase in operating costs, the company has adjusted the price of sold products, and the overall adjusted unit price has increased by about 4%. In addition, the company actively expand the piano industry structure, continue to launch high-end products, promote intelligent piano products. Among them, piano sales of high gross margin increased significantly, such as Walt Disney Company piano, Helen Vienna series, sales of 1151 units in 18 years, an increase of 76.54% over the same period last year. Benefiting from higher prices and higher sales of high-margin products, the company's piano business gross profit margin reached 28.92% last year, up 1.78pct from the same period last year.
Optimize the layout of art education and promote the rise of investment income. Since 2014, the company has actively expanded its art education and training programs, mainly by signing cooperation agreements with local training institutions. Over the past 18 years, the company has screened the targets of art education in cooperation, and selected well-developed target companies to increase capital. The company's shareholding in Helen colorful and Helen Yuxing management increased to 49%, and investment income increased by 165.7% over the same period last year.
Profit forecast and investment suggestion
As the costs of major piano raw materials have increased in varying degrees, and the progress of the company's extended art education business is slightly lower than we expected, we downgrade the company's completely diluted EPS in 2019 and 2020 to 0.26 EPS 0.32 yuan (the original 0.32 pound 0.41 yuan, the reduction rate is 18.9% 23.0%), the forecast company EPS will be 0.37 yuan in 2021, and the corresponding PE in three years will be as much as 35-28-24. Maintain the company's "overweight" rating.
Risk factors.
Competition in the piano industry has intensified, the risks of smart piano and online and offline art training and education projects, and rising prices of raw materials and labor costs.