Changhong's layout is diversified and its profitability needs to be improved. The five price stations of Changhong color TV from 1990 to 2003 made the company's business performance poor, and the label of the main business of color TV gradually blurred. After that, Changhong took the initiative to transform into IT, battery and real estate business, and embarked on the road of diversification. At present, the company's income structure is diversified: in 2018, the traditional household appliance industry (including black electricity, white electricity, refrigerator compressors and other components) accounted for about 65% of the total income of the IT, real estate, transportation and military industries accounted for 23%, 2%, 2%, 1% and 1%, respectively. In recent years, the company's overall revenue has grown steadily, and its performance hit bottom in 2015. Profitability needs to be improved urgently: the company does not increase profits on the road of diversified development, and the net profit rate of sales has been lower than 1% for 18 consecutive years since 2001.
Three factors of cost, technology and channel lead to the poor profit situation of black electricity enterprises. In the cost structure, the panel industry with a high proportion of upstream core panels has a high oligopoly, resulting in low added value of black electricity enterprises. From a technical point of view, due to the rapid change of color TV technology, it has experienced technological changes such as CRT picture tube TV, rear projection TV, plasma TV, LED LCD TV, OLED TV and so on since the 1990s. the rapid technological change makes it difficult for black TV enterprises to stand at the forefront of technology and form the advantage of core products. Judging from the changing process of downstream retail channels, in the process of migration to LCD TV, the rapid decline of upstream panel prices brings terminal products to passive price reduction all the time, and the self-built channels of black electricity enterprises are threatened by serious inventory price reduction preparation, so they are forced to adapt to the situation dominated by downstream KA stores, thus further losing their pricing power.
The development trend of black electricity industry: 4k/8k technology innovation drive + consumption upgrade large size leading + content value-added service leading. The "4K first, give consideration to 8K" policy has been introduced to accelerate the consumption of ultra-high-definition video products. At present, the number of 4K TVs in various provinces and cities is not high, and there is more room for improvement in the future. TV size boundaries have been constantly refreshed, and the era of "60 +" large screen has begun. The share of high-end products such as large-size 4K TVs will gradually increase, and the trend of consumer upgrading will not change. At the level of competition pattern, the traditional black electricity manufacturers lack hardware differentiation and rely on content value-added services to achieve a breakthrough to become an Internet brand. Internet TV represented by XIAOMI focuses on content differentiation and competes for traffic entry.
"military-civilian integration" + "intelligence" may open up room for growth. The future development of the company mainly focuses on the two strategies of civil-military integration and intelligent household appliances: under the strategic background of civil-military integration, the company integrates high-quality military assets and acquires the 100% equity of Sichuan Electronic military Industry Group Co., Ltd., a wholly-owned subsidiary of Sichuan Changhong Electronics holding Group Co., Ltd., the controlling shareholder. At the same time, the company began to transform the Internet in 2013, promoting the landing of the intelligent strategy of home appliances around "intelligence, networking and coordination". At present, Changhong in Sichuan Province has the largest research and development and intelligent manufacturing base for Chinese mainland's Internet of things modules and perceptual applications. the intelligent ecology of "hardware + software + content + operation + service" based on the Internet of things The strategic achievements of the transformation of smart home appliance business based on the Internet of things continue to appear.
Profit forecast and investment rating. We expect the company's net profit from 2019 to 2021 to be 378 million yuan, 495 million yuan and 628 million yuan, an increase of 17%, 31% and 27% over the same period last year, corresponding to a dynamic price-to-earnings ratio of 39 times, 30 times and 23 times. The mixed reform of established state-owned enterprises is expected to improve the governance structure, giving a "neutral" rating for the first time.
Risk hints: the price war in the black electricity industry continues, the competition pattern worsens, and the reform of state-owned enterprises falls short of expectations.