The company recently announced its latest annual report that its revenue in 2017 was 3.331 billion yuan, an increase of 15.77 percent, and its net profit was 137 million yuan, an increase of 4.88 percent. In the first quarter of 2018, revenue reached 861 million yuan, an increase of 18.03%, while the net profit returned to the mother was 56 million yuan, an increase of 12.05%. Our comments are as follows.
Abundant orders on hand, breakthroughs in overseas markets and expected future performance
In 2017, the company had plenty of orders on hand. The total amount of newly signed orders for the whole year reached 5.8 billion, an increase of 26.25%. In the first quarter of 18, the amount of newly signed orders reached 750 million yuan, 351 million less than last year and 25.07 percent lower than the same period last year, but the number of unsigned orders was four times that of last year, and it is expected that the number of newly signed orders will increase sharply in the next quarter. The company has stepped up efforts to expand overseas markets and contracted Cambodia's Phnom Penh Golden Pagoda 42 project with a contract value of 826 million yuan, accounting for 24.80% of 17 years' revenue. It is expected that overseas revenue will rise sharply in 18 years.
Revenue continued to grow steadily, during which the rate of expenses increased, resulting in a slight decline in gross profit margin in 17 years, the company achieved revenue of 3.331 billion yuan, an increase of 15.77%. Among them, the decoration business, which accounted for 89.72% of revenue, increased by 17.65%. Under the influence of the national examination policy, the performance of Xuelsen, a holding subsidiary, fell short of expectations, while vocational education, which accounted for 8.26% of revenue, also decreased by 0.76%. The company's revenue in the first quarter was 861 million yuan, an increase of 18.03%.
The gross profit margin of the company excluding the impact of business reform was 22.40%, down 0.97 percentage points from last year, mainly affected by the rapid rise in labor costs, and the gross profit margin of the decoration business was 18.47%, down 1.37 percentage points from last year. The gross profit margin of the vocational education sector is 70.43%, maintaining a high level. The rate of expenses during the period of the company is 18.12%, an increase of 2.98 percentage points over last year. Among them, the rate of sales expenses decreased by 0.91% due to the decrease in advertising expenses; the rate of management expenses increased by 1.11%, mainly due to the equity incentive scheme, which included amortization expenses; and the rate of financial expenses increased by 2.78%, mainly due to the increase in interest-bearing liabilities compared with the same period last year, and the interest on financial products in the current period was included in investment income. Taken together, the company's full-year net profit was 137 million, an increase of 4.88%. The net profit of returning to the mother in the first quarter was 56 million yuan, an increase of 12.05%, and the profitability was improved.
Extension mergers and acquisitions to develop the second main business of education, the performance is not up to expectations
Under the influence of the national examination policy, some qualifications have been suspended. Xuelsen has failed to fulfill its performance promise this period, resulting in a loss of 35.846 million yuan. The company has suspended the relevant fund-raising projects. Cross-examination education achieved a net profit of 46.8956 million yuan, fulfilling the performance commitment of 78.16%, mainly due to 17 years of active strategic transformation, while the increase in IT R & D investment led to a decline in profits.
The strategic decision of the company entered and distributed the field of front-end diploma vocational education in 17 years, and the company controlled Sichuan City Vocational College by signing a framework agreement to acquire 51% equity in Sichuan New concept Education in 18 years. If the performance commitment is realized, it is expected to contribute 33.15 million yuan to the net profit in 18 years, accounting for 24.20% of the 17-year return net profit. At the same time, the company plans to participate in 55% of Guangzhou Foreign Economic Vocational and Technical College this year. Because its number is similar to that of Sichuan New concept, we expect its net profit to be the same as Sichuan New concept, which is expected to further enhance the performance of the education sector in the future.
Investment advice: the company is full of orders on hand, lock in the steady growth of future performance, epitaxial mergers and acquisitions to develop the education industry, the company's performance is expected to grow rapidly in the short term. Due to the fact that the 17-year education business is lower than expected, we downgrade the EPS of 0.20,0.25,0.29 yuan per share in 2018-2020 (the original 0.25,0.34 yuan in 18-19 years), and the corresponding PE is 22,17,15 times. Since July last year, the valuation of the company has fallen by 30% due to investment behavior and the company's poor performance, and we have also lowered our target price from 7.54 to 5.5 yuan to maintain the "buy" rating for the time being.
Risk hint: educational M & An integration is not up to expectations, goodwill impairment risk