Company announcement: 1) 2018 revenue of RMB 42,466 million/ +7.16%, net return profit -231 million yuan/ -198.50%, net profit after non-return net profit - 801 million yuan/ -427.18%, ROE -9.27% /- 17.30pct, no disbursement; 2) 2019Q1 revenue of 10.204 million yuan/ -2.28%, net profit of 112 million yuan/ +187.11%, less net profit of non-attributable net profit of 0.14 billion yuan/ +148.32%, ROE 0.46% /+ 0.32pct
The scale of the mobile phone distribution business is gradually expanding, leading to a steady increase in revenue. In 2018, the mobile phone distribution business had revenue of 41,052 billion yuan/ +6.86%, accounting for 97.03% of revenue, and a gross profit margin of 1.65% /-1.74pct. The 19Q1 performance reversed losses, and the effect of reducing costs and increasing efficiency was remarkable. The reason was mainly due to the steady increase in sales revenue of new products by some agents.
The lottery business's sales capacity has been enhanced, and social channels have been laid out. In 2018, lottery business revenue was 429 million yuan/ +18.91%. In 2018, sales contracts for Hosai betting machines increased, sales volume and production increased, sales volume and production volume increased, sales volume of lottery equipment was 14,677 units, an increase of 132.89% over the previous year, and zero inventory was achieved. Meanwhile, in 2018, the Ministry of Finance and other departments issued Notice No. 105 on regulating online lottery ticket sales, and the regulatory environment for the lottery industry has become even stricter.
Focusing on the main business, the mobile internet business is developing rapidly. As the company's emerging main business, the mobile Internet business reflects a good development momentum under the opportunities of the times. The mobile resale business is developing rapidly, and performance targets have been exceeded. The company became one of the first few enterprises to have an official commercial license for mobile resale in three formats at the same time, and has also reached value-added business cooperation with China's leading Internet platform enterprises and basic operators, establishing a mature and stable operating platform for this business.
The commercial use of 5G is driving a wave of mobile phone switching. Smartphones are optional consumer goods, and basically cover all consumer power groups. Under the stock market, changes in mobile phones determine the frequency of switching between devices. Three factors are driving the wave of mobile phone switching. IDC expects to ship 6.7 million 5G phones in 2019, accounting for only 0.5% of global mobile phone shipments. In 2019, several mobile phone brands released 5G phones one after another, Samsung released the Galaxy 10 5G and Galaxy Fold, Huawei released MateX, and domestic brands such as Xiaomi and OnePlus also launched their first 5G phones one after another. 5G commercial use is expected to accelerate in 2019, and various terminal brands will release 5G phones one after another.
Profit forecast: Shenzhen Investment Holdings is gradually forming a “1+N” strategic layout, cooperating with Huawei going overseas to further promote the “going global” strategy for Chinese smartphones. It is estimated that the company's EPS in 19-21 will be 0.27, 0.35, and 0.47 yuan respectively, and the corresponding closing price PE of 5.7 will be 20.9, 16.1, and 12.0 times, respectively, maintaining the “prudent increase in holdings” rating.
Risk warning: upstream gross profit squeeze, overseas demand falling short of expectations, exchange rate risk, etc.