2020 performance is in line with our expectations
The company announced its 2020 results: revenue 40.09 billion yuan, year-on-year + 7.6%, home net profit 1.44 billion yuan, year-on-year + 92.8%, earnings per share 0.54 yuan; excluding the one-time income of 573 million yuan from the transfer of Guangzhou Skyworth plane display technology equity, the net profit was + 16.1% compared with the same period last year. Corresponding to 2H20, the operating income is 24.11 billion yuan, + 20.3% compared with the same period last year, and the net profit is 1.05 billion yuan, + 85.3% compared with the same period last year. Excluding the one-time income generated by the transfer of equity, the net profit is-15.9% compared with the same period last year. The company's performance is basically in line with our expectations.
The overseas growth of 2H20 TV business has accelerated significantly: 1) overseas TV revenue in 2020 was + 40.5% year-on-year and sales volume was + 39.5% year-on-year, of which 2H20 was + 72.4% and + 71.6% respectively.
The growth of TV overseas revenue accelerated significantly in the second half of the year, driving the company's annual revenue to achieve positive growth. 2) under the global epidemic, foreign governments' fiscal stimulus promotes the demand for overseas color TV sets.
According to AVC, global brand TV shipments in 2020 were + 1.1% year on year. 3) in 2020, the gross profit margin of the company's overseas TV business was 11.2%, year-on-year-2.8ppt, of which 2H20 gross profit margin was 11.3%, year-on-year-2.1ppt, mainly due to the negative impact of panel price increases.
Domestic TV revenue declined: 1) domestic TV revenue in 2020 was-10.4% year-on-year and sales were-15.9% year-on-year, of which 2H20 was-1.6% and-15.6% respectively. 2) the average domestic TV shipping price of 2H20 increased significantly, from + 17% to 1689 yuan per unit compared with the same period last year, mainly in response to the rise in panel prices, and the domestic TV price trend is obvious. For example, AVC monitors the average online and offline retail prices of 4Q20 Skyworth (including Kukai) TV + 21% and + 19% respectively compared with the same period last year.
Kukai Internet operation business is growing rapidly: 1) people watch TV longer under the epidemic, and the Internet operating income in 2020 is + 28% to 1.06 billion yuan compared with the same period last year. 2) by the end of 2020, the cumulative number of terminals of Kukai system in China exceeded 65 million, which was + 47% compared with the same period last year.
3) the gross profit margin of Internet business is 45.8%, and its profitability is significantly better than that of color TV hardware sales.
Other businesses in 2020: 1) the revenue of intelligent system technology (set-top box) is-8.9% year-on-year, domestic and foreign is-9.1% and-8.6% respectively, and the gross profit margin is much lower than the same period last year. 2) the annual revenue of white power business is-1.8% compared with the same period last year, mainly due to the impact of-12.8% revenue in the first quarter compared with the same period last year.
2H20 white electricity business revenue is + 9.3% compared with the same period last year, and the recovery is obvious. The gross profit margin is obviously under pressure under the background of rising prices of raw materials, with a gross profit margin of 13.7% for the whole year, year-on-year-2.2ppt.
Trend of development
January and February panel prices continue to rise, with 55-inch panel prices in January and February compared with + 4% and + 5%, respectively. We expect that the color TV business will still face declining profitability in the short term.
Profit forecast and valuation
Keep profit forecasts for 2021 and 2022 unchanged. The current share price corresponds to a price-to-earnings ratio of 6.0 times 2021 / 2022. Maintain the neutral rating and the target price of HK $2.59, corresponding to 5.9 times 2021 price-to-earnings ratio and 5.0 times 2022 price-to-earnings ratio, which is 0.4% lower than the current share price.
Risk.
RMB exchange rate fluctuation risk; Sino-US trade friction risk; new business development risk.