Event

On January 22, Aucma released its annual performance forecast for 2019. The company expects to achieve a net profit of 1.92 to 206 million yuan in 2019, an increase of 175 percent over the same period last year, and a net profit of 0.73 to 87 million yuan, an increase of 105 percent over the same period last year.

Quarter by quarter, 2019Q4 is expected to achieve a net profit of RMB 1.05-119 million in a single quarter, an increase of 407.89% and 137.87% over the same period last year, and the net profit of deducting non-return is RMB 0.16-30 million, an increase of 28.38%.

Our analysis and judgment

1. "Internet + full cold chain" has been firmly implemented, and revenue has increased against the trend in the past 19 years.

At the industry level, the home appliance market is under pressure due to the macroeconomic slowdown and real estate regulation in 2019. According to Oviyun's omni-channel data, sales of refrigerators, freezers and air conditioners in China reached 912,116 and 197.8 billion yuan respectively in 2019, with year-on-year changes of-4.7%, 5.1% and 4.3%, respectively. Offline market stall is the main factor affecting the sales performance of Baidian. In 2019, offline refrigerators, freezers and air conditioners achieved sales of 583,70 and 125.9 billion yuan respectively, with year-on-year changes of-10.8% and 1.6% respectively.

In the face of the severe market situation, the company continues to adhere to the "Internet + full cold chain" development strategy. in-depth coverage from the origin of pre-cooling (cold storage), cold-chain transport (refrigerated vehicles, electric insulation vehicles), cold-chain terminal storage (super convenience equipment, fresh and portable, automatic sales terminals), household refrigeration products (freezers, refrigerators, etc.) full cold chain product line coverage.

With the help of the Internet-based "ICM Smart full Cold chain Management system", we can provide smart cold chain and household appliances with market competitiveness, and achieve a complete set of cold chain solutions.

2019Q1-3 achieved a total revenue of 4.908 billion yuan, an increase of 12.50% over the same period last year, and its sales performance was better than that of the industry as a whole.

2. Increase in gross profit margin + thickening of non-recurring profit and loss, and substantial increase in profit end

According to the company's performance forecast, the company's parent net profit is expected to increase by 175% in 2019, while non-net profit is expected to increase by 105%. Profit growth is significantly faster than revenue growth. On the one hand, the substantial increase in the company's profits benefited from the improvement of profitability. In 2019, with the goal of "high-end breakthrough and explosive detonation", the company completed the development and landing of a number of highly competitive products such as commercial intelligent lattice cabinets and Zhiku deep-frozen embedded freezers. At the same time, benefiting from the decline in the prices of copper, iron, cold-rolled plates and other raw materials, the company's profitability was improved, and 2019Q1-3's sales gross profit margin increased by 0.75pct to 20.34%.

In terms of non-recurrent profit and loss, in 2019, the company made a net profit of about 86 million yuan on asset disposal from the collection and storage of some land use rights, which greatly thickened the profit end.

3. The company has a large expectation of mixed reform, and the straightening out of governance is expected to increase the vitality of the operation.

In July 2019, Qingdao listed a number of municipal state-owned enterprises such as Aucma, Hisense Group and Qingdao Shuangxing on the list of state-owned enterprises, and will attract all kinds of capital in accordance with the principle of "improving governance, strengthening incentives, highlighting the main business, and improving efficiency". Speed up the process of mixed reform of state-owned enterprises in Qingdao. Among them, Qingdao double Star began to mix and reform in October 2019, introducing strategic investors and implementing employee shares, and Hisense Video also began to plan a share transfer plan in December. Aucma has also carried out part of the promotion and recruitment of mixed reform objects, and in the future, it will cooperate with enterprises with strong market expansion ability and enterprises related to the upper and lower reaches of the company's industrial line to increase capital and shares, transfer shares, introduce strategic investors and other ways to promote the mixed reform process.

As of Q3 in 2019, Qingdao Enterprise Development Investment Company was the controlling shareholder of the company, accounting for 38.59% of the total equity, followed by Qingdao City Investment Financial Holdings, accounting for 8.71% of the equity. The actual control per capita is Qingdao SASAC, with a large weight of state-owned capital. Based on the shareholding situation in 2018, the total number of shares directly held by the company's seven senior executives is 4.33 million shares, accounting for only 0.54% of the company's total share capital. Equity incentives are insufficient. Affected by the nature of corporate ownership, there is much room for improvement in corporate governance and operational efficiency. If the mixed reform of Aucma is carried out smoothly, the incentives of key employees and management are expected to be strengthened. After the governance structure is straightened out, the company's operation and management is expected to coruscate new vitality.

Investment advice:

We expect the company's operating income from 2019 to 2020 to be 63.08 yuan and 7.097 billion yuan respectively, an increase of 11.75% and 12.50% respectively over the same period last year, and the net profit of returning home is 2.01 yuan and 224 million yuan respectively, an increase of 187.55% and 11.30% respectively over the same period last year, corresponding to 17.7x and 15.9x respectively.

Risk factors:

Real estate sales fell sharply; competition in the industry intensified sharply; raw material costs rose sharply.