Company dynamic events
According to the annual report released by the company on March 30, its operating income reached 2.345 billion yuan in 2018, an increase of 14.11% over the same period last year, and the net profit of 133 million yuan was deducted from the same period last year, up 138.37% from the same period last year. The company's profit distribution plan is 0.45 yuan (including tax) for every 10 shares, and the total cash dividend accounts for 35.84% of the 2018 net profit. At the same time, the company expects a net profit of 51.543 million yuan to 62.5882 million yuan in the first quarter, an increase of 40% and 70% over the same period last year.
Comments on matters
The company's profitability has improved significantly.
In 2018, the company's revenue from backlit LED products was 1.653 billion yuan, an increase of 15.12% over the same period last year, accounting for 70.50% of revenue, accounting for 294 million yuan in revenue, down 8.47% from the same period last year and accounting for 12.52% of revenue. In terms of the company's profit quality, the company's gross profit margin during the period was 21.86%, an increase of 0.14pct over the same period last year; net profit rate was 6.52%, an increase of 4.33pct over the same period last year; and return on equity was 8.55%, an increase of 5.25pct over the same period last year. In terms of the company's operating capacity, the company's period expense rate is 11.25%, year-on-year-1.60%; period expense rate is 11.25%, down 1.60pct from the same period last year; inventory turnover days are 38.56, compared with 39.92 in the same period last year; accounts receivable turnover days are 127.16, compared with 123.39 in the same period last year; enterprise free cash flow is 148 million yuan, compared with 254 million yuan in the same period last year. In terms of the company's capital structure and solvency, the company's asset-liability ratio during the period was 40.27%, down 3.86 pct from the same period last year; the current ratio and quick ratio were 1.67 and 1.51 respectively, with little change compared with the same period last year. Overall, the company's financial indicators improved significantly in 2018. The company's goodwill dropped from 32.27 million yuan at the beginning to 18.33 million yuan at the end of the period, down 43.19% from the same period last year, mainly due to the provision of 14 million yuan for Hong Kong subsidiary LiveCom. Non-recurrent profit and loss totaled 26.6725 million yuan, compared with 3.9976 million yuan in the same period last year, mainly due to government subsidy of 33.42 million yuan in the current period.
Capacity release and thickening performance of production expansion project
The project under construction of the company dropped to 67 million yuan from 155 million yuan in 2017, and the fixed assets increased from 523 million yuan to 846 million yuan, mainly due to the consolidation of the project of Huizhou Industrial Park. The project is mainly aimed at small size backlight LED packaging devices, medium and large size backlight LED packaging devices, LED lighting products. The investment of the project is close to 1.6 billion yuan, which was implemented in August 2016 and put into production in the second quarter of 2018. We expect that the gradual release of the production capacity of the expansion project will lead to the growth of the company's performance.
Profit forecast and valuation
We expect the company to achieve operating income of 2.795 billion yuan, 3.347 billion yuan and 4.025 billion yuan from 2019 to 2021, an increase of 19.19%, 19.75% and 20.26% respectively over the same period last year. The net profit of shareholders belonging to the parent company is 233 million yuan, 304 million yuan and 390 million yuan, up 45.75%, 30.54% and 28.11% respectively. The EPS was 0.18,0.24 and 0.31 yuan, respectively, and the corresponding PE was 20.16,15.45,12.06 respectively. The "overweight" rating will be covered for the first time in the next six months.
Risk hint
Sino-US trade talks deteriorated; LED demand was weaker than expected.