Qingdao King King (002094) 2018 Annual Report and 2019 First Quarterly Report Comment: Goodwill impairment erodes performance, beauty and new retail continue to move forward

Qingdao King King (002094) 2018 Annual Report and 2019 First Quarterly Report Comment: Goodwill impairment erodes performance, beauty and new retail continue to move forward
Core point of view The competition in the cosmetics industry has intensified. In 2018, the company confirmed the impairment of goodwill1.0 billion dragged down performance.Pay attention to the company’s dealer channels, marketing innovation and the construction of new beauty retail platforms. Revenue has grown steadily, and net profit has increased.In 2018, the company achieved operating income / attributable net profit of 54.600 million / 1.0 ‰, +16 for ten years.7% /-74.1%; net non-attributable profit is 0.9 trillion a year -53.5%.In 2019Q1, the company realized operating income / attributable net profit13.500 million / 0.3 ‰, +13 a year.3% /-43.3%; net non-attributable profit is 0.3 trillion, -44 a year.5%.In 2018, affected by the increase in cosmetics business expenses, the company achieved net operating cash flow of -1.200000000.Due to the sale of Hangzhou Youke’s equity (expected to generate an investment income of USD 300 million), the company estimates that the net profit attributable to H1 in 2019 will be 2.800 million-3.400 million, previously + 120%?+ 170%. Impairment of goodwill erodes profits: Youco is performing well, and the performance of Asiana falls short of promise.In 2018, Youco / Yueyue / Hana achieved net profit of 131.3 million / 53.69 million / 33.17 million yuan (originally promised to be 123 million / 84 million / 46 million yuan), increasing by +12.5% /-29.7% /-13.4%; industrial chain companies realized net profit of 65.61 million yuan, a year -22.1%.In 2018, the company recognized the impairment loss of goodwill1.10,000 yuan, of which Asiana / Monthly confirmed goodwill impairment provision of 41.02 million / 31.35 million yuan.Excluding the one-time income of Uco in 20172.2 ppm and impairment of goodwill for the period1.After the impact of 0 million yuan, the company’s attributable net profit in 2018 was +11.9%. The cosmetics business maintained high growth, with gross profit margins falling slightly.In 2018, the company’s cosmetics / candles / oil products trading business respectively achieved operating income of 35.700 million / 6.100 million / 12.800 million, +39 a year.3% / + 11.4% /-18.5%.The gross profit margin of the cosmetics business is high, and the sales personnel’s expenditures are large. In 2018, the gross profit of the cosmetics business drove the company’s comprehensive gross profit margin / sales expense ratio / administrative expense ratio +2.66 / + 3.15 / + 0.77% to 23.98% / 11.02% / 4.99%.Affected by intensified competition and channel diversion, the gross profit margin of the company’s cosmetics business decreased by -1 in 2018.41% to 31.73%. The store network is rich and smart new retail empowers.At present, the company has integrated 22 provincial distributors, representing 200+ domestic and foreign cosmetics brands, and has accumulated about 9,500 store resources, forming the largest procurement platform and offline retail store network in China’s cosmetics industry.The company’s “digital new retail SaaS technology service platform” has been put into use in “smart makeup optimized” intelligent retail stores and has begun trial operation in Shandong, Zhejiang, Anhui and other places; in cooperation with Tencent, in payment / scene / system development / big dataExpand Cooperation.Through centralized purchasing, intelligent logistics, consumer finance, and access to integrated management systems for terminal stores, the company promotes the digital upgrade of new retail terminals and improves the operating efficiency of channel operators. Risk factors: The CS channel is severely diverted; the construction 四川耍耍网 speed of the new beauty retail platform is slower than expected. Investment suggestion: Consider selling the equity of Hangzhou Youke, and lower the company’s 2019-20 operating income forecast to 51.500 million / 54.4 trillion, lowered its 2019-20 net profit forecast to 3.500 million / 1.10,000 yuan, plus 2021 operating income / net profit forecasts are 57.700 million / 1.3 trillion, corresponding to a non-net profit increase of +14 in 2020-21.0% / + 15.5%; corresponding to 2019-21 EPS are 0.51/0.16/0.19 yuan (the original 2019/20 forecast was 0.67/0.80 yuan), maintain “Buy” rating.