Focus Media (002027) Annual Report Comments: Short-term performance continues to weigh on optimistic mid- and long-term layout value
Event: The company released its 2018 annual report and 2019 first quarter report.
The company achieved operating income of 145 in 2018.
51 ppm, an increase of 21 per year.
12%; net profit 58.
23 ppm, a decrease of 3 per year.
03%; net profit 50 after excluding non-recurring gains and losses.
26 ppm, an increase of 3 per year.
58%; basic return is 0.
40 yuan; the company distributed a cash dividend of 1 yuan (including tax) to shareholders for every 10 shares.
The company achieved operating income in the first quarter of 201926.
11 trillion, down 11 a year.
78%; net profit 3.
4 billion, down 71 a year.
81%; net profit after excluding non-recurring gains and losses1.
16 trillion, down 89 a year.
Key points of investment: Media growth in the life circle is better than the overall advertising industry.
Affected by external macro factors, the domestic advertising market in 2018 went from high growth at the beginning of the year to return to stability at the end of the year and finally achieved 2.
A slight increase of 9%, among which the growth of the media in the living circle is still very stable, and the revenue of elevator television advertisements has increased by 23.
4%, elevator video poster advertising revenue increased 24.
9%, the growth rate is higher than the level in 2017; although the growth rate of cinema video ads is improved compared to 2017, it is still as high as 18.
Significantly accelerated expansion in 2018 led to high costs.
Since the second quarter of 2018, the company has significantly increased elevator media resources.
As of the end of 2018, the company’s self-operated elevator TV media from 30 in 2017.
80,000 units increased to 72.
40,000 units, an increase of 134.
6%; self-operated elevator poster media points from 121.
100,000 to 193 in 2018.
80,000, an increase of 60.
The rapid expansion strategy brought high media resource point rents, equipment depreciation, labor and operation and maintenance costs plus the newly set up points still need time to reach a profitable state. Therefore, the profit side in 2018 was under pressure.
As of the first quarter of 2019, the company’s elevator media resources reached 275.
50,000, an increase of 9 around the end of 2018.
30,000, while the 18-year routine has increased by 114.
80,000 points. The speed of point expansion in 2019 is already obvious. It is expected that the company will focus on point optimization in 2019 and is committed to improving the efficiency of point use.
Rising operating costs led to a decline in gross profit margin.
In 2018, the company’s overall business gross margin was 66.21%, down 6 from 17 years.
In terms of business, building media realized 120 operating income.
76 trillion, an increase of 28 in ten years.
69%, operating cost 36.
12 ‰, an increase of 65 per year.
24%, gross margin is 70.
09%, down 6 from 17 years.
61 units; theater media operating income23.
82 ppm, an increase of 2 per year.
08%, operating cost 12.
24 ppm, an increase of 23 per year.
79%; gross margin is 48.
60%, a decrease of 9 from 17 years.
The 18-year expense ratio remained basically stable, and rose in the first quarter of 1919.
The company’s 2018 selling expenses were 23.
31 ppm, an increase of 16 in ten years.
69%, accounting for 16.
02%, a decrease of 0 from 17 years.
Management costs are 4.
12 ppm, an increase of 36 per year.
64%, R & D expenses are 2.
28 ppm, an increase of 2 per year.
07%, the total R & D expense ratio and management expense ratio is 4.
40%, an increase of 0 from 2017.
02 units; financial expenses were 93.65 million yuan, a decrease of 27 per year.
03%; four expense ratios totaled 19.
78%, a decrease of 0 from 17 years.
16 units, basically maintained stable.
In the first quarter of 2019, the budget rate ratio increased to varying degrees. Around 18 years, the sales expense ratio increased by 2.
With 6 averages, the management expense ratio increased by 2.
In total, 17 R & D expenses increased by 0.
27 per share, financial expense ratio increased by 0.
Short-to-medium-term performance will remain under pressure.
The company’s operating income for the first quarter fell by 11 each year.
78%, operating costs increased by 80.
24%, net profit decreased by 71 after reducing non-recurring losses.
81% and 89.
17%, gross margin from 66 at the end of 18.
21% dropped to 36.
Affected by the macro economy, the weakness in the growth rate of the advertising market in the fourth quarter of 2018 is expected to continue into the second quarter. Therefore, the company’s net profit is expected to decline by 77 in the first half of 2019.
88% to 67.
Cooperation with Ali is progressing in an orderly manner.
In 2018, Alibaba took a stake in Focus Media and became the company’s second largest shareholder.
The two parties have jointly signed a strategic cooperation agreement. In the future, they will jointly increase the value of global advertising and work together in areas such as face recognition, electronic screen recognition interaction technology, and OTT smart TV.
The company’s next-generation elevator TV 杭州桑拿 screen has a real-time monitoring system for advertising effects. The elevator posters enabled by big data can achieve accurate distribution of thousands of faces. Advertising screens have been tested on the network, can be detected in real time, data can be returned, and effects can be evaluated.
The digitization of the company’s advertising points can effectively help advertisers achieve precise delivery, improve the efficiency of advertising and sales conversion rates, and increase the value of the company’s advertising points in the long run.
Investment rating and profit forecast: There are two main reasons for the company’s performance under pressure in 18 and 19 years: (1) Influenced by the company’s 18-year high-speed expansion strategy and updating the elevator TV screen and elevator poster frame equipment; the company’s rent, equipment andThe cost of labor and other costs has increased significantly; (2) Advertisers’ delivery expectations are affected by the external economic environment, Internet companies are affected by the market, and the delivery expectations are significantly offset from the delivery budget. It is difficult to effectively increase the number of advertising spots.
We don’t think we need to be too pessimistic about the company’s long-term development, because: (1) the company’s expansion strategy has been gradually phased out, and in the future, it will focus on the optimization strategy to increase the point utilization rate, and the cost pressure will gradually be eased; (2) the external economic environment is recoveringThe long-term expectations of the advertising market and the long-term expectations of advertisers are expected to increase the company’s advertising position publication rate; (3) the company still has the market share advantage and financial strength in the industry competition pattern, and the macroeconomics has a major impact on factors(4) Continue to be optimistic about the company’s cooperation with Ali and inherit Ali’s technical capabilities. The value of the company’s advertising placement will be transformed into the company’s digital progress.
While optimistic about the company’s long-term investment value, but the short-term performance will continue to be under pressure, the company maintains its “overweight” investment rating. It is expected that the company’s EPS in 2019 and 2020 will be 0.
25 yuan and 0.
29 yuan, according to the closing price of 6 on April 26.
17 yuan, the corresponding PE is 25.
0 times and 20.
Risk warning: Macroeconomic recovery is lower than expected; rental costs rise; industry competition intensifies