1H19 performance is higher than we expected.
The company announced 3Q19 results: operating income was 887 million yuan, an increase of 20.5% over the same period last year, and net profit was 28 million yuan, an increase of 25.9% over the same period last year. Corresponding to 1Q-3Q19 's operating income of 2.51 billion yuan, an increase of 10.8% over the same period last year, and the net profit of returning home was 108 million yuan, down 5.2% from the same period last year. Due to the increase in export orders, the net profit is higher than we expected.
Export business leads to income growth: 1) 3Q19's export business benefits from the expansion of new customers and the depreciation of RMB exchange rate, which increases a lot, leading to a significant increase in overall income. 2) domestic sales are better than 1H19. Sales at 3Q19 Estelle's flagship kitchenware stores were + 11 per cent year-on-year to 11.67 million yuan, while sales in the kitchen / cooking products industry rose 4 per cent year-on-year, according to Amoy. The growth rate of Estella flagship store is higher than that of the industry, mainly due to store price reduction and promotion, and the average transaction price is-24% compared with the same period last year.
3Q19 financial analysis: 1) the gross profit margin increased slightly to 35.8% year-on-year, mainly because the devaluation of 3Q19 RMB led to a large increase in export business gross profit margin compared with the same period last year. 2) driven by the scale effect of income growth, the rate of corporate management expenses has been reduced to 5.3% compared with the same period last year. 3) R & D expenses increased by 14% year-on-year to 41 million yuan, accounting for 4.7% of revenue, which is higher than that of ordinary home appliance companies. 4) the loss of 1H19, the robotics business acquired by the company, is a drag on the company's profitability, and we estimate that the 3Q19 robotics business is still losing money. 5) the net interest rate of the company belonging to the parent company is 3.1%, a slight increase in 0.1ppt compared with the same period last year, which is still at a historically low level.
Trend of development
2Q19 acquired a 39 per cent stake in Qianjiang Robot, rising to 90 per cent after the acquisition. Estelle regards the robot business as the key development direction, which is still in the period of development and is still in a state of loss in the short term. The company's export business and domestic cooking utensils business are the main sources of profit, and the market performance needs to be improved.
Profit forecast and valuation
Due to the higher-than-expected performance, we raised the EPS 2% in 2019 to 0.41. 47 yuan in 20e. Maintain the neutral rating and maintain the target price of 9.00 yuan, which corresponds to 22x/19x2019/20e PCME, which has 7% upside compared to the current share price. The current share price corresponds to a price-to-earnings ratio of 20.2 / 17.9 in 2019 / 2020.
Risk.
The risk of trade friction between China and the United States; the risk of declining demand in the domestic market.
