1H18's annual performance meets expectations
Sichuan Changhong announced its results for the first half of 2018: revenue of 38.4 billion yuan, + 10.5% YoY, and net profit of 170 million yuan, + 9.3%YoY, corresponding to EPS 0.04 yuan. In the second quarter, the revenue was 19.6 billion yuan, + 8% YoY; returned to the mother net profit of 108 million yuan,-11% YoY.
Profit contribution of various categories: the demand for color TV is still poor, but due to the effect of downward panel prices, the gross profit increased by about 1ppt, and the net profit increased by 110 million yuan compared with the same period last year; the air conditioner and refrigerator business was affected by the adjustment of settlement methods and online sales, the gross profit decreased by about 2ppt, and the net profit decreased by about 100 million compared with the same period last year; the refrigerator compressor business was affected by rising raw materials and fierce terminal bidding, and the net profit decreased by about 68 million yuan compared with the same period last year. Set-top box due to the sharp rise in the price of raw material components, 2B contract lack of price elasticity, gross profit fell sharply 8ppt, net profit decreased by 35 million yuan compared with the same period last year.
Trend of development
Acquisition of military industrial enterprises: the company plans to acquire 100% shares of 081 Group controlled by its parent company for 1.73 billion yuan (1x Pqqab B). The group has a complete industrial chain for scientific research and production of short-range air defense weapons and equipment electronic systems, and if the acquisition is completed, it will actively expand its business to the military industry. The injection of military assets may be helpful to improve the valuation level of listed companies, and this acquisition may mean the subsequent continuous asset integration and the improvement of operational efficiency, incentive mechanism and other governance aspects.
OEM for XIAOMI: the company gives full play to the manufacturing capacity of second-line faucets and manufactures air conditioners and other products for XIAOMI. In the future, such as XIAOMI white power sales increase, the company's white power orders are expected to increase.
Profit forecast
Keep the current profit forecast unchanged.
Valuation and suggestion
The current share price of the company corresponds to 18max, 27max, 1919, and 25x Pmax E. To maintain a neutral rating, due to the decline in overall market valuations, the target price was lowered by 15% to 3.08 yuan, corresponding to the 18-pound 31-pound 19-fold Pmax E. The target price has 12% room to rise compared with the current share price.
Risk
Competition risk in color TV market.