1. The latest financial report: in 2019, the company realized revenue of 10.506 billion yuan (YOY-2.24%), net profit of 192 million yuan (YOY+49.71%), and net profit of 201 million yuan (YOY+14.55%). 2020Q1 realized operating income of 2.149 billion yuan (YOY+0.52%), net profit of 13 million yuan (turning losses into profits), and net profit of 14 million yuan (turning losses into profits).
Second, transform the brand operation, optimize the business model, and improve the overall gross profit margin of the company's business.
In 2019, the company upgraded the original buyout sales agency business and transformed the brand operation, which is essentially from the original distribution link to the generation operation and retail link with high gross profit margin, optimizing the business model and expanding the profit space. In April 2020, the company issued a fixed increase plan to raise 909 million yuan, mainly for brand operation and other business. On May 1, the first joint venture brand interest card was launched in the social e-commerce channel. Through the comparative study with Yichuang, we think that the company's new business model is expected to emulate the online marketing business (gross margin 42%) and online management business (gross profit 70%) for a long time. Considering the company's existing customer structure, we believe that the gross profit margin of the brand agent operation is expected to increase to 25% + this year.
3. The structure of advertisers has been optimized and the share of Longtou City has been further improved. In 2019, the advertisers of the company's marketing business turned to the Gaojing demeanor, beauty and makeup industry, realizing a steady increase in brand marketing revenue compared with the same period last year. From the perspective of the competition pattern of the industry, the share of Longtou City is expected to further increase, and the larger the scale, the more preferential the media policy.
4. Investment suggestions: we are optimistic about the company's current business development to brand operation, from marketing to the retail end, the business ceiling is opened, and the overall gross profit margin of the company is raised on behalf of the operation business. At the same time, the company has accumulated for many years in the field of digital marketing, strong control over customer relations and media resources, continuous growth of old customers and continuous development of new customers. We expect the company to achieve total operating income of 117.58 yuan, 138.88 yuan and 15.493 billion yuan respectively from 2020 to 2022, an increase of 11.9%, 18.1% and 11.6% respectively over the same period last year, with a net profit of 3.28,4.61 and 538 million yuan, an increase of 70.8%, 40.3% and 16.8% respectively. The closing price on May 6 corresponds to a price-to-earnings ratio of 16x, 11x and 10x for 20-22 years, respectively. Coverage for the first time to give a buy rating.
Risk hint
The policy risk of advertising industry, the prosperity risk of advertiser industry and the risk of company cost control.
