It is forecast that net profit in 2019 will decline by 80% to 86% compared with the same period last year.
The company announced a performance forecast: the net profit attributed to the parent company in 2019 is expected to be 45 million yuan to 65 million yuan, down 80% to 86% compared with the same period last year, and the net profit after deduction is expected to be-4.37 yuan-457 million yuan. The large losses in the color TV business led to a lower performance than we expected.
Pay attention to the main points
The loss of color TV is a significant drag on performance: 1) affected by the intensification of price competition in the industry, the company's color TV business lost money in 2019, resulting in a sharp decline in profits in 2019. The company's color TV business has declined a lot in 2018, with revenue of-6% year-on-year and profit of 116 million yuan less than the same period last year, which is on the edge of breaking even. 2) trying to improve sales, the company makes channel and marketing adjustments, resulting in an increase in expenses in 2019. 3) in 2019, the company received a total of 278 million yuan in government subsidies, including 197 million yuan related to income and 81 million yuan related to assets. Rely on subsidies to achieve no loss.
The retail demand for color TV continues to be weak: 1) China's color TV market is still sluggish. According to AVC statistics, the retail volume and retail sales of the color TV industry in 2019 were-2% and-11% respectively compared with the same period last year. 2) the price competition in the industry is still very fierce, and the average retail price in the industry has dropped by 9% compared with the same period last year, especially in the online market, with the average retail price falling by 14% compared with the same period last year. In 2019, retail sales in XIAOMI's online market increased by 34% compared with the same period last year, with a share of 23%, an increase in 6.4ppt.
3) the online and offline retail sales of Changhong color wire are-5% and-27% respectively compared with the same period last year, and the average retail price is-16% and-4% respectively compared with the same period last year. The company's offline retail share is-1.3ppt to 9% compared with the same period last year, and the decline in the company's retail share is mainly affected by channel adjustment.
Meiling's share of the refrigerator market is stable: 1) according to AVC monitoring, online and offline retail sales in the refrigerator industry in 2019 were + 14% and-3% respectively compared with the same period last year. 2) Meiling refrigerator performance is basically consistent with the industry, online and offline retail sales are + 13% and-3% respectively compared with the same period last year, and the market share remains stable.
Valuation and suggestion
Due to the lower-than-expected performance, we lowered the 2019 EPS forecast for 2020 by 82% to 39% to 0.04 yuan / 0.04 yuan, and introduced the 2021 EPS forecast of 0.04 yuan. Maintain the neutral rating and maintain the target price of 2.88 yuan, corresponding to the price-to-earnings ratio of 262x/67x 2019 to 2020, which has 2% upside compared to the current share price. The company's current share price corresponds to the price-to-earnings ratio of 258x/66x 2019 Universe 2020.
Risk
Competition risk in color TV market.