Event: the company announced a revised announcement of its 2019 performance forecast, revising Q3's estimated net profit of 400 million to 500 million to 480 million to 530 million, compared with a loss of 108 million yuan in the same period last year.
The main reasons for the company's performance revision are as follows: 1) the performance of 2019 holding subsidiary Beijing Liantuo is expected to fall short of expectations, and the company will make provision for impairment of goodwill in Q4 to reduce the company's regular profits and losses. 2) due to the failure to meet the performance promise during the period from 2015 to 2018, CEO Chen Peng transferred 19.18% of his stake in Beijing Rio Tinto to the company free of charge, and the company will recognize this part of the investment income in Q4, which will increase the company's non-recurrent profit and loss profit. 3) the fair value of the stock investment business of Q4 company has increased significantly than expected. 4) after deducting non-recurring profit and loss items, the net profit of homing in 2019 is expected to be 2.1-260 million yuan, an increase of 652.15% and 783.61%.
We believe that the profits of the main business will usher in the repair and enter the steady recovery channel. On the one hand, although the company considers the impairment of goodwill as recurrent profit or loss, in fact, under the strategy of focusing on the main business, the impairment of goodwill will not have a long-term lasting impact on the company, in order to restore the real profit of the main business, we exclude this part of the impact when calculating the main business profit, and it is expected that the company's main business after-tax profit will reach more than 300 million in 2019 after deducting the impact of goodwill impairment. On the other hand, in order to maintain the stable profitability of the main business, the company has gradually carried out strict lock-in management of the exchange rate over the past 19 years, so we expect the company's gross profit margin to stabilize at more than 28%. At the same time, exchange gains and losses will not have a significant impact on the statements. without taking into account the impact of exchange gains and losses, we believe that the after-tax profit of the main business is expected to reach more than 350 million in 2019.
The logic of the company's future growth is clear and the expected return is stable. In the context of the trade war, the company has invested heavily in production, channel and management, so in 2019, excluding the exchange rate factor, North American orders exceeded the company's expectations, and the European market development effect was obvious. The income growth rate of 2019H1 in North America and Europe was 15% and 43% respectively, reflecting a breakthrough in the company's own channel and production management. In the future, the company is also expected to achieve continuous repair of performance through gradual expansion of new regions and new customers, capacity expansion, breakthroughs in superior categories (such as sunshade products).
At the same time, under the strategy of focusing on the main business, the company will gradually realize and shrink the investment in financial assets, and the funds on the account will be very abundant, so the company will strengthen its return to shareholders. According to our estimated 630 million performance expectations and 60% dividend ratio in fiscal year 2020, the company's dividend yield is 3.6%.
Profit forecast and investment rating: in summary, we raise the company's performance forecast for 2019-2021 to 503 million / 631 million / 755 million yuan, which is 566.8%, 25.4% and 19.7%, respectively, and the corresponding PE is 21X/17X/14X. Taking into account the company is a typical low valuation and growth, as well as high dividend attribute of the target, maintain the "buy" rating!
Risk hint: great changes have taken place in the international trade environment, the progress of production expansion in Henan is not as expected, and the exchange rate fluctuates sharply.
