Changhong, Sichuan (600839): Strategic transformation of smart home military-civilian integration enhances estimated space

Changhong, Sichuan (600839): Strategic transformation of smart home military-civilian integration enhances estimated space

Changhong has a diversified layout and urgently needs to improve its profitability.

Changhong Color TV’s five price standpoints from 1990 to 2003 led to the company’s poor operating performance, and the label of the main business of color TV gradually blurred. Since then, Changhong has taken the initiative to switch to IT, battery and real estate businesses, and embarked on a road of diversified operations.
At present, the company’s income structure is diversified. In 2018, the traditional household appliance industry (including black electricity, white electricity, refrigerator compressors and other components) accounted for about 65% of the total revenue; IT, real estate, transportation and military industry revenue accounted for respectivelyIt is 23%, 2%, 2%, 1% and 1%.

The estimated overall revenue of the company is steadily increasing, and its performance bottomed out in 2015, and its profitability needs to be improved urgently: The company has increased its revenue on the road of diversified development but has not increased its profits. Since 2001, the net sales margin has been below 1% for 18 consecutive years.

The three factors of cost, technology and channels have led to poor profitability of black power companies.

In the cost structure, the high proportion of upstream core panels and the highly competitive oligopoly in the panel industry have resulted in low added value for black power companies.

From a technical point of view, due to the rapid change of color TV technology, since the 1990s, it has undergone technological changes such as CRT picture tube TVs, rear projection TVs, plasma TVs, LED LCD TVs, and OLED TVs. Rapid technological changes have made it difficult for black power companies to stand on the technological frontForm core product advantages.

Judging from the change history of the downstream retail channel, during the migration to LCD TVs, the rapid decline in the prices of upstream panels has brought end-products to passive price cuts at all times. Black power companies ‘self-built channels have been threatened by severe inventory price reductions and forced to adapt.Downstream KA stores dominate the situation, thereby further eliminating pricing 厦门夜网 power.

Black electricity industry development trend: 4k / 8k technology innovation drive + consumption upgrade large size + content value-added services lead.

The “4K first and 8K” policy was introduced to accelerate the consumption of ultra-high-definition video products. At present, the number of 4K TVs in various provinces and cities is not high, and space penetration will be improved in the future. At the retail end, the size of TVs is constantly being refreshed.Has been opened, the proportion of high-end 4K TVs and other high-end products will gradually increase, and the trend of consumption upgrade will not change.

On the scale of the competition pattern, traditional black power vendors have insufficient hardware differentiation. As content value-added services break through and become the way to break the Internet brand, Internet TV, represented by Xiaomi, strives to differentiate content and compete for traffic entry.

“Military-civilian integration” + “intelligence” may open up room for growth.

The future development of the company mainly focuses on the two major strategic expansions of military-civilian integration and intelligent home appliances. In the strategic context of military-civilian integration, the company integrates high-quality military assets and acquires the controlling shareholder Sichuan Changhong Electronics Holdings Group Co., Ltd.100% equity of 081 Electronics Group Co., Ltd. held by the responsible company.

At the same time, the company began to transform the Internet from 2013, and promoted the intelligent strategy of home appliances based on “intelligence, networking, and collaboration.” Sichuan Changhong currently has the largest R & D and intelligent manufacturing base for IoT modules and sensing applications in mainland China.The five-in-one intelligent ecosystem of “hardware + software + content + operation + service” of networking has made the transformation strategy of smart home appliance business based on the Internet of Things bigger and stronger.

Profit forecast and investment rating.

We estimate the company’s net profit for 2019-2021.

7.8 billion, 4.

9.5 billion and 6.

USD 2.8 billion, with annual growth of 17%, 31% and 27%, corresponding to dynamic P / E ratios of 39 times, 30 times and 23 times; the company’s military and civilians simultaneously increase the scale, and the veteran state-owned enterprises have been restructured to speed up and improve the governance structure.

Risk reminder: The price war in the black power industry continues, and the competitive landscape is deteriorating; the reform of state-owned enterprises has fallen short of expectations.