Performance review
2018 and 1Q19 results meet expectations
Fanta Technology announced its 2018 results: revenue was 3.35 billion yuan, up 4.2% from the same period last year, while its net profit was 780 million yuan, down 275.9% from the same period last year. Basically in line with the previous forecast, the large loss was mainly due to the provision of 660 million yuan of goodwill and the provision of 240 million yuan for inventory price decline.
Fanta also announced 1Q19 results: operating income was 680 million yuan, up 6.5% from the same period last year; net profit from home was 48.34 million yuan, down 10.5% from the same period last year; and 26.06 million yuan was deducted from non-net profit, down 50.5% from the same period last year. Mainly due to the relocation of Opunda, 1Q lost about 17 million, compared with the same period last year profit of 16 million, the impact is greater.
Trend of development
Speakers are still the biggest attraction: Fanta is one of the main contract manufacturers of intelligent speakers in China. Last year, the overall speaker business grew by 30%, mainly due to the high growth of smart speakers. This year, we see that Fanta continues to improve the R & D and promotion of smart speakers with brands such as BABA, Baidu, Inc., JD.com and Huawei. More than 1 million sets were shipped in March, and 2Q is expected to further upstream. We expect the year-on-year growth rate of speaker business to further increase to 40-50% for the whole year.
Healthy appliances have grown steadily and smart wear has begun to break out: last year, health appliances grew by 12%. This year, the company began to extend to its own brand and adopt the ODM+OBM model, which has the opportunity to increase the growth rate. Smart wear is mainly smartwatch / bracelet, etc., together with sports, health and even medical applications such as Philips, Huawei and Decathlon, 1Q has increased 2-3 times year-on-year this year, and we expect it to more than double for the whole year.
Metal parts are still the biggest drag: last year, Opunda suffered a relatively large loss, with an operating loss of more than 200 million yuan. In addition, goodwill and inventory planning have a greater impact. It will continue to lose money in the first half of this year due to the relocation of factories, and will gradually improve after the resumption of production in the second half of this year. But the specific performance needs to be observed. Fuchengda has a good performance in medical care, e-cigarettes and other high-margin metal parts, and continues to maintain growth.
Profit forecast
Considering the growth potential of speakers and smart wearers, we raised the company's 2019e EPS by 1% to 0.23 yuan and introduced 2020e EPS 0.28 yuan.
Valuation and suggestion
The company's current share price corresponds to the 19-year 21.6x Pram E. Remain neutral, taking into account the upward valuation of the sector as a whole and the acceleration of speaker and wearable business growth, raising the target price by 41% to 5.00 yuan, corresponding to 21.3x Pmax E in 19 years, compared with the current 2% downside space.
Risk.
Opunda loss risk, smartphone shipments downside risk.