The company plans to absorb and merge Wanmao Acoustics to realize the layout of acoustic components + whole machine industry chain. Wanmao ODM business benefits from the outbreak of intelligent audio industry, and its own brand business is expected to become a leading acoustic brand in China. We estimate that the EPS of listed companies in 2019-2021 will be 0.09, 0.37, 0.48 yuan, maintaining the "buy" rating.
A total of electroacoustics + ten thousand demons acoustics business cooperation reflects, the performance of listed companies exceeded expectations in 2019. The company released its 2019 results, KuaiBao, with an income of 987 million yuan (+ 23% compared with the same period last year) and a net profit of 31 million yuan (+ 47% year-on-year). In addition, the company also made provision for impairment of various assets of 28 million yuan, indicating that the net profit from actual operation was about 59 million yuan, exceeding market expectations. We believe that the company's traditional main business is microphones, speakers and other acoustic components, while the planned merger and absorption of magic acoustics is the acoustics whole machine such as TWS, both of which have a strong upstream and downstream synergy of the industrial chain. Since Mr. Xie Guanhong, the master of ten thousand demons, actually controlled the listed companies at the end of 2017, this synergy is gradually emerging, with revenue growth of + 2.3% in 2018 and 23% in 2019. Quarter by quarter, the company's performance is also improving quarter by quarter, 2019Q4 achieved revenue of 296 million yuan (month-on-month + 27%), return to the mother net profit of 15 million yuan (month-on-month + 67%).
Continue to promote the merger of ten thousand demons acoustics, and it is expected that 2020Q3 will report again. The company continues to promote the absorption and merger plan of Magic Acoustics, and will subsequently request the shareholders' meeting to extend the absorption and merger plan for 12 months from the date of expiration of the resolution of the previous shareholders' meeting (expected to be May 2020 to May 2021).
The previous absorption and merger plan of the company was rejected by the CSRC, which is mainly due to (1) insufficient disclosure that the actual controller of the underlying assets has not changed in the past three years, and (2) the underlying asset sales and profit sources are highly dependent on related parties.
According to the company announcement, the real controller of the underlying asset (i.e. Magic Acoustics) has been Mr. Xie Guanhong immediately since 2013.
Before June 2017, financial investors held a majority of board seats due to shareholding ratio, but did not actually control the underlying assets; after June 2017, the company dismantled its overseas investment structure. Mr. Xie Guanhong began to hold a majority of board seats (5x8). Looking forward to the follow-up, we believe that listed companies are expected to restart the absorption and merger plan in 2020Q3, and Wanmao + Gunda Synergy will open up a new growth space for the company in the future.
With the outbreak of intelligent audio industry, the growth of ten thousand demon acoustics business is clear. Since 2018, the smart audio industry has broken out, and there is also a trend that mobile phone manufacturers will be equipped with TWS headphones. It is estimated that Android TWS headphones will ship 68 million / 130 million units in 2019 / 2020. Wanmao Acoustics is a leading ODM manufacturer of TWS headphones in China, including XIAOMI Air, Huawei FreeBuds, FlyPods series, OPPO Enco Free and so on. It is expected that TWS headphone shipments in 2019 and 2020 will reach 4.5 million / 10 million, and Wanmao will continue to expand in the client. In the future, it is expected to cut into the supply chain of vivo, BABA, Alphabet Inc-CL C and other well-known manufacturers. Self-brand products, the company has released Stylish, take the initiative to reduce the noise of two self-brand TWS headphones, positioning high-end, self-brand revenue is expected to reach 22,000,000 yuan in 2019 / 2020. In the long run, Monster focuses on the audio business, while laying out wearable, health, car and home areas, and is committed to becoming an acoustic technology company providing system solutions in the IoT era.
Risk factors: the risk of restructuring failure; increased competition in the industry; new product promotion is not as expected; R & D is not as expected
Investment suggestion: we predict that the net profit of the company's headquarters in 2019-21 will be 0.31 trillion yuan, and the net profit of magic acoustics will be 1.6 million yuan. Assuming that the table will be consolidated in 2020, we will adjust the preparation EPS for 2019-2021 to 0.09 shock 0.37 shock 0.48 yuan (the original forecast is 0.06 pound 0.3310 million). Based on the valuation of the exam preparation, we give the merged company 40 times the target PE in 2020, corresponding to the target price of 14.70 yuan, maintaining the "buy" rating.