Events:
The company released a report for the first quarter of 2019: Q1 achieved operating income of 142 million yuan in 2019, down 11.36% from the same period last year. The net profit returned to its mother was-8.0557 million yuan, reducing losses by 15.33% over the same period last year, and deducting non-net profit of-10.0323 million yuan, which was basically the same as the same period last year. In terms of cash flow, in 2019, Q1 received 104 million yuan in cash from selling goods and providing services, down 31.1% from the same period last year, and the net cash flow from business activities was 83 million yuan. The company expects 2019H1 to make a net profit of-1050 to-7.76 million yuan and return to its mother of-9.13 million yuan.
Comments:
The competition in the industry is fierce, and the profits of the company's main business are declining. 2019Q1's gross profit margin and net profit margin were 22.43% and-5.08% respectively, down 1.25% and 0.45pct from the same period last year. The company's revenue and profit declined, mainly due to increased competition in the industry. In 2019, Q1 company adopted measures such as optimizing management, reducing cost and increasing efficiency, so that the expense rate was well controlled, in which the expense rate during the period was 24.82%, which was down by 1.75pct compared with the same period last year. The sales / management / R & D / financial expense rate was 7.71%, 14.07%, 3.02%, 0.01%, respectively, with year-on-year changes of-1.74max, 1.05m2, 0.96, 0.1 pct.
Create the layout of the lottery industry chain and vigorously develop new business at the same time. The company actively arranges lottery R & D and electronic lottery business operation, through electronic lottery, lottery R & D, lottery platform construction, cuts into the field of upstream lottery R & D and downstream sales, and strives to break through the entire lottery industry chain. Q1 R & D invested 4.295 million yuan in 2019. At the same time, the company has made great efforts to develop new business, the newly developed "Happy very" video lottery game has been launched in Chongqing welfare lottery, and has invested money in the research and development of sports lottery Android terminals, and the product has officially passed the test.
Acquire Huawei 5G core suppliers and enter the upper reaches of the 5G industry chain. The company and Hong Kong Flemish Technology Co., Ltd. signed the "Flemish Technology (Shenzhen) Co., Ltd. Equity transfer Framework Agreement" in Fuzhou, and the company plans to acquire 30% equity interest of Flemish Technology with 345 million yuan in cash.
According to the quarterly report, the company will sign a formal equity transfer agreement with Flemish shareholders after the completion of Flemish technology audit and other work, and carry out the corresponding approval procedures. Flanders' main products are base station antennas and radio frequency devices. At present, there are three domestic production bases, and customers mainly include Huawei, Jingxin Communications, BYD, Foxconn and other well-known manufacturers. Fleming Technology is the strategic core supplier of Huawei, and the listed company in the same industry as Dongshan Precision is located in the first echelon of domestic base station antenna production. The completion of the acquisition of Flanders by Hongbo shares will improve the strategic layout of 5G in the 5G era, build new profit growth points of the company, and enhance the overall profitability of the company.
We estimate that the company's EPS for 2019-2020 will be 0.1,0.34 yuan respectively, corresponding to 104.92 and 30.4 times PE for 2019-2020, respectively, maintaining a "buy" rating.
Risk hint: the development of the main lottery business is not as expected, and the new business is not as expected.