Net profit of 1Q19 in 2018 is in line with expectations
Galaxy Electronics announced its 2018 results: operating income was 1.519 billion yuan, down 6.47% from the same period last year; net profit attributed to the parent company was-1.167 billion yuan, down 723% from the same period last year, corresponding to earnings per share of-1.04 yuan. The company also disclosed the first quarter of 2019 results: operating income of 295 million yuan, YoY-14.28%, return net profit of 34.58 million yuan, YoY-12.73%, in line with expectations.
The provision for impairment of goodwill results in a loss of 18 years. In 2018, revenue from key components of digital set-top boxes / smart mechatronics / electric vehicles respectively YoY-24%/+12%/+8%, gross profit margin YoY-5ppt/-4ppt/+0.3ppt. The R & D expenditure is 150 million yuan, and YoY+16%, accounts for 9.9% of the current revenue, which is mainly used for the development of intelligent mechanical and electrical, especially military products. The impairment loss of assets was 1.32 billion yuan, of which the impairment loss of goodwill was 1.08 billion yuan, the loss of bad debts was 220 million yuan, and the book value of goodwill at the end of the period was 170 million yuan.
1Q19 gross profit margin improved significantly. 1Q19's gross profit margin is 38%, with a month-on-month / year-on-year increase of 13ppt / 11ppt; the net cash flow of operating activities is-10.18 million yuan, and the net outflow is 30 million yuan lower than the same period last year.
Trend of development
The company's overall performance will improve in 2019. 1) Intelligent mechatronics: in 2018, the field portable intelligent charger made a breakthrough, the bidding for starting power won the company a reputation, and the rocket army market developed; Fujian Junpeng introduced some new vehicle factory customers, and we expect to improve further in 2019. 2) key parts of electric vehicles: Yinhe Tongzhi's electric vehicle air conditioning compressor has been sold in bulk on a certain scale, and its performance has been highly recognized by customers, and the company expects to continue to grow steadily in 2019; 3) Digital set-top box: it will continue to shrink in 2018, and has gradually transferred from the parent company to the subsidiary Yinhe Digital independent operation.
Profit forecast
We adjust the forecast of itemized income and the rate of period expenses, but keep the forecast of net profit in 1920 unchanged at 214 million yuan / 257 million yuan.
Valuation and suggestion
At present, the company's share price corresponds to 25.9x/21.6x 19amp 20e Pmax E. We maintained a neutral rating, but due to a pick-up in market sentiment, we raised our target price by 47.06 per cent to Rmb5.00, which is 1.63 per cent higher than the current share price, corresponding to 26x/22x 19max 20e Phand E.
Risk
Jiasheng power performance recovery, Galaxy Tongzhi new product release rhythm, digital set-top box business cost changes are still uncertain.
