The 2019 and 1Q20 results are in line with the previous KuaiBao / forecast and our expectation that Oriental Garden will disclose its 2019 and 1Q20 performance: 2019 realized income of 8.13 billion yuan, a decrease of 38.8% over the same period last year, and a net profit of 51.91 million yuan, a decrease of 96.7% over the same period last year. 4Q19 realized income of 4.3 billion yuan, an increase of 17.9%, and a year-on-year increase of 51.0%. 1Q20 realized income of 440 million yuan, a decrease of 56.5% over the same period last year, and a net loss of 290 million yuan, an increase of 6.7% over the same period last year. The performance is in line with the previous KuaiBao / forecast and our expectations.
4Q19's gross profit margin decreased by 6.8ppt to 30.5% compared with the same period last year, while the four expense rates combined decreased 13.9ppt over the same period last year, and the investment income was 11.04 million yuan, significantly lower than the 310 million yuan in the same period last year, mainly due to the high base of asset disposal last year, and 4Q19's net profit rate increased by 4.8ppt to 21.8% compared with the same period last year. 1Q20's gross profit margin decreased by 6.7ppt to 21.1% compared with the same period last year, and the expense rate increased by 30.4ppt, in which the financial expense rate significantly increased 23.2ppt, mainly due to a reduction in revenue; 1Q20's net loss as a share of revenue increased by 38.5ppt to 65.0% compared with the same period last year. In 2019, the company had a net operating cash outflow of 1.33 billion yuan, which was worse than the net inflow of 50.93 million yuan in the same period last year, mainly due to the implementation of operating adjustment and a reduction in the scale of income, while the inventory turnover of receivables was still slow; the net investment cash outflow was 620 million yuan, 83% smaller than the same period last year. The net cash outflow from 1Q20 operations was 840 million yuan, which continued to expand compared with the same period last year.
Trend of development
4Q19 management shows a trend of improvement, pay attention to the follow-up progress. 4Q19 single-quarter company income and net profit returned to positive year-on-year growth, operating cash inflow also expanded compared with the same period last year, we believe that the company's endogenous operation has gradually improved after the introduction of state-owned assets. 1Q20 company revenue affected by the epidemic year-on-year decline; the company expects 1H20 net profit-2.1-50 million yuan, central implied 2Q20 net profit of 210 million yuan, year-on-year improvement; we suggest to continue to pay attention to the company's follow-up business progress.
Pay attention to the progress of external financing. The company plans to raise external financing in a variety of ways in 2020:
While adjusting the long-and short-term structure of existing debt, we will promote equity financing such as the issuance of preferred shares and the introduction of strategic investors by subsidiaries. We expect that if the transaction is settled by the end of the year, it is expected to reduce the company's net debt ratio and improve the balance sheet, and it is recommended to pay attention to the progress of the relevant transactions.
Profit forecast and valuation
The company's current price corresponds to 13.1x 2020e Pamp E. We maintain the 2020-2021 profit forecast and target price of 5.74 yuan unchanged, corresponding to 14.7 x 2020e Pmax E and 11% space, and maintain the industry rating of outperforming.
Risk.
Revenue recovery fell short of expectations; external financing did not make as much progress as expected.