Cobos (603486) 2019 Interim Report Review: Domestic Demand Pressures Leader and Shoulder

Cobos (603486) 2019 Interim Report Review: Domestic Demand Pressures Leader and Shoulder
Event: Cobos released its 2019 Interim Report, and the company achieved operating income of 24 in 2019H1.3 ‰, at least -3.8%, realizing net profit attributable to mother 1.3 trillion, -36 a year.6%.Among them, the company achieved revenue in 2019Q211.8 ‰, at least -10.2%, net profit attributable to mother is 61.4 million yuan, -46 for many years.9%, single-quarter revenue and profit exceeded expectations, sweeping machine OEM orders continued to decrease, the domestic independent brand sweeping machine revenue growth accelerated, resulting in sweeping machine business growth slower than market expectations. In addition, the company launched an extended stock incentive plan for 2019 (supplementary). Comments: Revenue analysis: Decreasing demand for domestic sweepers is the primary role of the company’s revenue under pressure. 1) The internal sales revenue of sweeper brands has stalled, and export sales have maintained rapid growth. 19H1 robot independent brand revenue increased by +11.2%, of which 19Q2 independent brand revenue is estimated at least during the period, mainly due to the decline in domestic independent brand revenue in 19Q2.According to the monitoring data of Zhongyikang, the retail sales of the domestic sweeper industry in H1 2019 decreased by 9%.2%, especially 19Q2, was significantly above.Although Cobos’ retail sales share exceeded 8pc to 48%, the domestic sales revenue of sweeping machines is still under pressure. Cobos is a domestic sweeper enterprise that pioneered overseas markets with its own team. In 19H1, it continued to expand its sales team. Against the background of the continuous outbreak of overseas demand, the company ‘s independent brand ‘s overseas revenue grew rapidly, with a growth rate of 40%about. 2) The contraction of OEM orders for sweeping machines is stronger than market expectations.In 2018, the company’s cleaning machine foundry revenue was about 4 trillion, but it can penetrate the European and American markets through the Cobos brand and compete directly. The company chose to strategically abandon some of the foundry orders.Starting from 2018H2, the company’s robot foundry business began to shrink, and the revenue of the sweeper foundry business increased from 18H1 to 2.About 5 million dropped significantly to about 4,000 million in 19H1, and the contraction was stronger than the market expected. 3) Due to the impact of tariffs on vacuum cleaner foundry, 19H1 revenue decreased by 14%.The US government’s plan to impose tariffs on US $ 200 billion of Chinese goods includes vacuum cleaners. On January 1, 2019, a 10% tariff was implemented.In order to minimize the impact of tariffs, the 2018H2 industry began to show obvious export orders for vacuum cleaners, which partially overdrawn orders in the first half of 2019, so the company’s 19H1 vacuum cleaner OEM / ODM export revenue decreased by 14%. 4) Revenue of vacuum cleaner’s own brand increased to zero.9.6 billion.19H1 increased its product development and promotion in the “TINECO” brand vacuum cleaner business. 19H1 revenue increased by 119% to 0 compared with the same period last year.9.6 billion. Taken together, the company’s revenue growth in the past two quarters was +3.1%, -10.2%, the growth rate expanded earlier than 18 years, mainly affected by three factors: 1) private brand robot revenue growth channels; 2) robot OEM orders significantly reduced; 2) vacuum cleaner OEM orders due to early “robbing exports””Overdraft, interference. Profitability: R & D, channel expenses, and profitability are under pressure. The company’s overall gross profit margin for 2019H1 will still increase by 0.7pct, of which 19Q2 gross margin increased slightly by 0.2pct.As the overseas market increased the distribution ratio, and the gross profit margin of the distribution channel relatively decreased, the company’s gross profit margin in Q2 2019 narrowed and remained basically the same. Cobos continues to add research and development and sales talent, with costs increasing even more.The concentration of the sweeper industry is constantly increasing. It is related to the expansion of Cobos. Cobos can increase its R & D investment to maintain guidance on the product side and build high competition barriers.At the same time, actively explore new markets and new channels. Some Coboss have aggressively entered mainstream offline retail channels such as Bestbuy and Costco in the United States to seize first-mover advantages at the channel end. In the absence of sufficient capacity in other aspects, a reasonable choice to increase investment in products and channels, but it will inevitably lead to an increase in the short-term sales and R & D expense ratio.Close to 4pct. Growth, short-term pressure on profitability.As the company invested a lot of resources to strengthen its R & D and sales capabilities, but the short-term revenue growth rate dropped, so the operating profit margin was under pressure.In addition, 2018H1 generated exchange gains of 678 million, while 2019H1 generated exchange losses of 810,000 yuan, so the net profit margin for 2019H1 decreased by 3.6 points to 5.2%, short-term profitability pressure. Assets and profit quality: Inventories and accounts receivables continued to increase. The normal operating performance of the company in 2019H1 was 481.8 billion. The net cash flow from operating activities was successfully positive, and it increased significantly compared with the same period last year. The steady increase of the company’s accounts receivable is estimated to be related to the extension of the account period of domestic e-commerce platforms.Since the overseas market was developed through the internal sales team, 19H1 inventories still had 1.1 billion U.S. dollars. It is expected that the income from the transfer of overseas markets will grow rapidly and the inventories may rise. The above changes can have normal operating results. Business prospects: Deeply plowing domestic and foreign markets, betting on transition products companies to use alternative space in the financial report to discuss and analyze the company’s core competitiveness, business status, and future development status in detail. Looking forward, the company’s business focus is divided into threeAspects: 1) Increase domestic low-end product lines and find increments in difficult situations: The rapid decline in domestic market demand in the first half of 2019 was unexpected, and it must be found in difficult situations before it is put into product launch.The low-end random product line is within the company’s ability and a lucrative market segment. The company 成都桑拿网 is expected to become a new brand and re-enter the low-end random product market to survive the low tide of the industry. 2) Accelerate the development of overseas markets with the United States as the core: The United States is the initial popularity of sweepers and one of the countries with the largest market potential, but as the home base of iRobot, its market share is always firmly in the hands of iRobot.The reason is that offline channels are still the mainstream channels in the US market, and entering these mainstream channels is not easy.In 2018, Cobos became the only Chinese brand that entered the mainstream retail channels in the United States on a large scale. About 40% of the growth rate of overseas independent brands in the first half of 2019 was due to the accelerated development of overseas channels. 3) Betting on cutting-edge products to lead the market back to growth: DG70 equipped with AIVI technology is Coves’ first attempt in the field of machine vision. In the annual report, we saw the company introduce the development of a new generation of sensor modules for the first time.Trying to improve the robot’s in-depth understanding of space and environmental information, the company is expected to realize a new generation of sensor modules in 2020, which will upgrade the product experience of sweepers. If consumers can recognize alternative products, the domestic market is expected to return to growth. Profit forecast, forecast and rating predict that the company’s revenue growth rate in 2019 will be more than 10%, among which the growth rate of the sweeper’s independent brand business is 10?20%.The company’s 2019 annual stock incentive plan’s performance evaluation target for independent brands of sweepers is to increase by 10% per year in 2019 and 20% per year in 2020-2022. Due to the continuous increase in expenses and the supplementation of revenue growth, the company’s short-term profitability is under pressure. The company’s 2019 stock incentive plan’s assessment target for net profit growth is an annual increase of 15% from 2020-2022. Because the company’s 19Q2 performance exceeded expectations, we cut 2019?The 21-year net profit forecast is 4.8/5.9/7.200 million (was 5).8/7.2/8.800 million), due to the increase in equity, the corresponding EPS is adjusted to 0.85/1.05/1.At 29 yuan, the current PE is expected to be 30/24/20 times. Although the domestic market needs short-term difficulties, the service robot circuit is still full of opportunities to maintain the “overweight” level. Risk Warning: The global demand for sweepers is lower than expected; and a large amount of investment is increased.