Rongtai Health (603579) 2018 Annual Report and 2019 First Quarterly Report Comment: Short-term pressure on profitability is expected to improve quarterly

Rongtai Health (603579) 2018 Annual Report and 2019 First Quarterly Report Comment: Short-term pressure on profitability is expected to improve quarterly

Rongtai Health (603579) 2018 Annual Report and 2019 First Quarterly Report Comment: Short-term pressure on profitability is expected to improve quarterly
Matters: The company published the 2018 annual report and the 2019 first quarter report on April 23, 2019.Realized operating income in 201822.9.6 billion, previously +19.70%; net profit attributable to mother 2.49 trillion, ten years +15.28%; basic return 1.78 yuan.It is planned to distribute a cash dividend of 3 yuan (including tax) to all shareholders for every 10 shares.In Q1 2019, it achieved revenue of 5.110,000 yuan, at least -15.22%; net profit attributable to mother 0.580,000 yuan, at least -0.83%. Comment: The forecast of the growth rate of single quarter revenue performance, the operating performance is slightly lower than 天津夜网 expected.The company’s 2018Q3 / 2018Q4 / 2019Q1 revenue increased by +14 respectively.55% /-16.04% /-15.22%, net profit attributable to mother twice.94% / + 6.95% /-0.83%.The Q1 operating results in the 2018 single quarter and 2019 single quarter were slightly higher than expected. We believe that it should be that the destocking of large Korean customers in the second half of 2018 affected the company’s export revenue (the export revenue for the full year of 2018 was 9).4.9 billion, at least -2.05%; Mainland China revenue 13.3.4 billion, previously +42.05%); Second, experiential massage services are affected by intensified competition, increased venue rents, etc., and profitability has shifted. Experience massage services revenue in 20183.66 trillion, +56 a year.71%, it is calculated that the company’s 2018 single Q4 and 2019 single Q1 shared massage service revenues have declined by about 20% in the background of the same period last year.We believe that with the completion of destocking by major customers, the company actively controls the progress of the launch of shared massage chairs and the continuous development of the domestic market brought by user education, and the company’s revenue performance will promote quarterly improvement in the future. The intensified competition for shared massage and the adjustment of product structure have led to a decline in profitability.The company’s gross profit margin in 2018 was 34.07% (year -4.15pct) net interest rate 10.89% (decade -0.92pct), we believe that the decline in gross profit margin is mainly due to the increase in the price of raw materials in the previous period. The proportion of Momoda home massage chairs that reset the gross profit margin has increased and competition in the shared massage market has increased. Among them, shared massage services are subject to venue rent and shared massage.Chair depreciation stalls, intensified competition, and other factors affect the extent of changes in gross profit margins.As for the period expense ratio, the company’s sales expense ratio for 2018 was half a year-1.38pct to 12.35%, management and R & D expense rate -0 per second.74pct to 8.18%, the financial expense rate is ten years -1.51pct to 0.11%.In the first quarter of 2019, the company’s gross profit margin continued to fall under pressure, but its net profit margin improved due to the increase in exchange income and the improvement of management efficiency. The gross profit margin was 29.05% (six years-6.13pct) and a net interest rate of 10.61% (decade +0.30pct).The depreciation and amortization of the first implanted shared massage chair is expected to end in 2019, and profitability is expected to rise and fall. Operating cash flow improved in the first quarter, and expectations are positive.Net operating cash flow of the company for the first quarter1.400 million US dollars, previously + 159%, indicating that the company’s return is in good condition; 82.04 million advances received, previously +44.59%, mainly due to dealers’ active bookings, and the company ‘s new production capacity in Nanxun and Qingpu is gradually released, which is expected to improve. Optimistic about the company’s development and maintain the “strong push” level.We believe that through the company’s ability to control fluctuations in raw material prices, market expansion capabilities and expenses, and profitability promotion, we continue to be optimistic about the company’s development.Due to the intensified competition of short-term shared massage services and the significant impact of destocking by large customers in overseas operations, we have lowered the company’s profit forecast. It is expected that the company’s net profit attributable to mothers will be 3 in 2019-2021.08/3.97/4.920,000 yuan (originally predicted net profit attributable to mothers from 2019 to 20203.20/4.05 ppm), corresponding to the current market capitalization PE of 15/11/9 times. Considering the gradual recovery of the company ‘s overseas business and the release of production capacity, the company is given a 20 times PE in 2019, which is a target price of 45 yuan, and maintains a “strong push” rating. Risk reminder: the macroeconomic downturn leads to sluggish demand, the market development fails to meet expectations, and major customers’ operating risks.