The company's home net profit fell 36.5% in 2018 compared with the same period last year. The company achieved operating income of 847 million yuan in 2018, down 5.4% from the same period last year, and its net profit was 75.855 million yuan, down 36.5% from the same period last year, lower than our expectations. The decline in the company's performance, on the one hand, was affected by macroeconomic growth and the automobile industry. In 2018, China's automobile market terminal showed negative annual growth for the first time, down 6.9% from the same period last year. At the same time, environmental protection factors affected some terminal demand. The decline in the industry economy has affected the company's product sales. On the other hand, it comes from the increase in costs, mainly because the company increased the cost of technological research and development of differentiated products and increased advertising expenses to deepen brand influence in order to enhance market competitiveness. During the reporting period, the R & D expenditure was 25.5177 million yuan, an increase of 74.0% over the same period last year. At the same time, advertising spending was 23.0844 million yuan, an increase of 111.3% over the same period last year.
The company has been certified as a high-tech enterprise for 18 years and enjoys the preferential income tax rate. The company announced in November 2018 that Qingdao Compton Petrochemical Co., Ltd., the main operating subsidiary, was recognized as a high-tech enterprise on November 12, 2018. The company enjoys a 15% enterprise income tax discount for high-tech enterprises within three years from 2018, so as to improve the company's net profit.
19Q1 business is basically flat compared with the same period last year. In the first quarter of 19, the company achieved operating income of 278 million, down 1.9% from the same period last year, but the gross profit margin rose to 36.47%, up 1.72% from the same period last year and 8.23% from the previous year. 19Q1 achieved a net profit of 49.4 million, up 1.4% from the same period last year. The first quarter was the relative peak season for the company's operation, and the overall operation was basically the same as 18Q1, and the performance growth was mainly due to the impact of income tax adjustment.
Investment suggestion: the company locates the automotive aftermarket AM market, adopts differentiation strategy, has a strong comprehensive strength in the field of automotive medium and high-level lubricating oil, and will benefit from the trend of high-quality lubricating oil demand. Faced with the relocation of new factories from 2017 to 2018, the company experienced a period of over-adjustment, and its operation was affected, and the company actively made changes, announcing the appointment of two deputy general managers in November 2018 and March 2019. After the introduction of senior management personnel and business structure, it is expected to improve the overall management level, broaden sales channels and open more markets, while pre-advertising investment is expected to play a role to improve product sales. Considering the decline of the company's business in 2018, the company downgraded its EPS forecast from 2019 to 2020 to 0.72 yuan and 0.81 yuan respectively (the original pre-EPS forecast was 0.89 yuan and 1.02 yuan respectively), and the new 2021 forecast was 0.92 yuan, corresponding to 15 times, 14 times and 12 times of PE, respectively.
Risk hint: the company's market development and product sales are not as expected; the company's product profit margin has declined; and the price of base oil has risen sharply.
