2019 performance is in line with our expectations
Guanghui Baoxin announced its 2019 results: revenue was 36.46 billion yuan, down 0.9% from the same period last year; net profit was 629 million yuan, corresponding to 0.22 yuan per share, an increase of 13.1% over the same period last year. The company's 2H19 realized revenue of 19.12 billion yuan, down 3.5% from the same period last year, and net profit from its mother was 309 million yuan, an increase of 59.5% over the same period last year, which is basically in line with our expectations.
Trend of development
The gross profit margin of new cars shows a rebound trend, and the improvement of cost management brings marginal improvement. The company's 2019 net profit increased against the market, and the net interest rate increased by 0.22ppt to 1.73% compared with the same period last year, which we believe is mainly due to the marginal improvement brought about by the rebound in gross profit margin and the slight decline in expense rate. The company's 2H19 new car gross profit margin increased by 0.17ppt and 0.6ppt to 2.6% compared with the previous month, with an obvious upward trend, which we think is mainly due to the pull of the BMW brand and the gradual recovery of Jaguar Land Rover. For the whole year of 2019, the management efficiency of the company has been improved, and the sales fee rate has been reduced by 0.12ppt to 5.3%. Among them, the rate of 2H19 sales expenses has dropped to 3.3% compared with the same period last year, and the cost control has achieved good results.
Inventory turnover days decreased, short-term liquidity may be under pressure. Due to the brand's adjustment of supply strategy, the company's management efficiency was improved, the company's inventory decreased by 630 million to 3.5 billion yuan, and the turnover days decreased by 3.8days to 41.5days. The company repaid some of the loans in 2019, and the asset-liability ratio decreased slightly, but short-term bank and other loans increased by 3.85 billion yuan, mainly due to the maturity or imminent maturity of some overseas syndicated loans, or brought short-term liquidity pressure on the company. This year, the company plans to adjust the financing structure at home and abroad, reduce the scale of overseas financing, or reduce the risk of exchange losses and optimize financing costs.
With the parent company resource adjustment, play a greater coordination. In November 19, the company bought two BMW 4S stores from its parent company Guanghui Motor, and upgraded it to one BMW 4S store, bringing the number of BMW-branded stores to 47. We believe that the resource adjustment of the company and Guanghui Automobile for the BMW brand increases the market share of the company's main brands, stabilizes the company's dominant position in the BMW brand channel, and makes Guanghui Automobile and Guanghui Baoxin play greater cooperation.
Profit forecast and valuation
For the time being, we will keep the profit forecast for 2020 unchanged and introduce a net profit of 825 million yuan for 2021. The current share price corresponds to a price-to-earnings ratio of 3.7 times 2021 / 3.1 times earnings. Maintain a neutral rating, but due to the impact of the epidemic on the valuation hub of the sector, we lowered our target price by 29.3% to HK $1.30 corresponding to 4.6 times 2020 price-to-earnings ratio and 3.9 times 2021 price-to-earnings ratio, which is 25.0% upside from the current share price.
Risk
Demand recovery is not as good as expected