20211027-软库中华金融服务-HOME_CONTROL-01747.HK-Remain_trapped_in_the_haze_of_the_pandemic,maintain_the_rating_of_HOLD_and_slash_the_TP_to_HKD_0.75_share_7页_347kb

Home Control (01747.HK) Summary

Core Content

Home Control (01747.HK) is a company that has been significantly impacted by the ongoing effects of the pandemic, particularly in its North America operations. The company has maintained a "HOLD" rating with a revised target price of HKD 0.75 per share, reflecting the continued challenges it faces in recovering from the financial setbacks caused by the pandemic.

Key Financial Performance (2021 1H)

• Total Revenue: USD 46.6 million, a 33.3% YoY decline.
• Revenue Breakdown:
  • North America: USD 4.3 million, down 85.2% YoY.
  • Latin America: USD 10.4 million, down 1.4% YoY.
  • Asia: USD 15.3 million, up 11.1% YoY.
  • Europe: USD 16.6 million, up 1.2% YoY.
• Gross Margin: Improved by 4.2 percentage points YoY to 24.6%.
• Net Profit: USD 0.1 million, down 94.6% YoY.
• Profit Before Tax: USD 1.4 million, down 73.5% YoY.

Financial Strategies

• The company has shifted its product mix to higher-margin items to improve profitability.
• Refinanced higher-interest bank loans in February 2021 to reduce financial costs.
• Despite the revenue decline, the company managed to break even in 2021 1H after accounting for abnormal costs.

Outlook and Risks

• Recovery Constraints: External uncertainties, including IC shortages and power cuts in China, are expected to hinder RCU production and sales growth in 2021 2H.
• Pandemic Impact: Ongoing lockdowns and restrictions continue to delay product deliveries, especially in North America.
• Risk Factors:
  • Lower-than-expected growth in MSO and OTT subscriptions.
  • Continued IC shortages and power cuts affecting production.
  • Rapid spread of new variants leading to reduced demand.
  • Potential changes in dividend policy.
  • Failure to progress acquisition plans.

Peer Comparison

Company	Market Cap (mn)	PE (X)	Fw PE (X)	PB (X)	PS (X)	Revenue (mn)	GM (%)	ROE (%)
Universal Electronics	4,545.3	14.3	9.7	1.9	1.0	4,767.5	28.7	10.4
Sony (6758.JP)	1,153,700.0	14.4	21.1	2.4	1.8	658,142.2	27.1	19.3
LG Electronics (066570.KS)	136,988.6	8.4	7.2	1.3	0.3	416,603.7	25.8	8.6
Home Control (01747.HK)	396.3	21.9	N/A	2.9	0.5	1,040.8	20.3	13.3

Financial Ratios (2020–2023)

Ratio	2020 (A)	2021 (E)	2022 (E)	2023 (E)
Gross Margin	20.3%	23.2%	21.9%	20.7%
Operating Margin	3.5%	1.3%	3.1%	3.0%
Net Profit Margin	2.8%	0.9%	2.3%	2.2%
Return on Equity (ROE)	20.7%	5.3%	15.3%	15.1%
Return on Asset (ROA)	4.0%	1.3%	3.4%	3.2%
Debt-to-Equity Ratio	141.9%	141.3%	140.6%	140.0%

Cash Flow and Capital Expenditure

• Profit Before Tax: USD 1.4 million (2021 1H).
• Finance Expenses: USD 3.0 million (2021 1H).
• Change in Working Capital: Negative USD 0.0 million (2021 1H).
• CFO: USD 5.8 million (2021 1H).
• CAPEX: USD 1.7 million (2021 1H).
• CFI: USD 1.9 million (2021 1H).
• CFF: USD -4.7 million (2021 1H).
• FCFE: USD 2.7 million (2021 1H).
• FCFF: USD 4.7 million (2021 1H).

Analyst Rating and Valuation

• Rating: HOLD.
• Target Price (HKD): 0.75/share.
• Valuation Multiples:
  • Forward PE: 48.3x (2021), 15.8x (2022), 14.2x (2023).
• Current Price (HKD): 0.79/share.
• Price Range (Last 12 months): 0.63 – 0.98 HKD/share.
• Market Cap (HKD, bn): 3.96 bn.

Conclusion

Home Control (01747.HK) continues to struggle with the aftermath of the pandemic, particularly in the North America region. While the company has taken steps to improve its gross margin and reduce financial costs through product mix changes and refinancing, the overall performance remains below expectations. The company's recovery is still constrained by external factors such as IC shortages and power cuts in China. Given these uncertainties and the lack of a clear turnaround signal, the analyst has maintained the "HOLD" rating and reduced the target price.