1H21's performance is in line with our expectations.
The company announced 1H21 results: operating income reached 404 million yuan, an increase of 19.4% over the same period last year, and net profit returned to its mother was 84 million yuan, an increase of 5.3% over the same period last year. The net profit after deducting non-return was 77 million yuan, an increase of 15.5% over the same period last year. In a single quarter, the operating income and net profit of 2021 decreased by 1.6% compared with the same period last year. 15.2% to 2.39 / 50 million yuan.
The gross profit margin decreased compared with the same period last year, and the expense rate increased during the period. 1H21's gross profit margin fell 2.3ppt to 34.5% year-on-year, of which the mechanical watch business gross margin fell 4.0ppt, mainly due to exchange rate fluctuations and rising commodity prices involved in raw materials. During the 1H21/2021 period, the expense rate increased by 1.4 3.2ppt compared with the same period last year, of which the sales / management / R & D / financial expense rate of 2Q21 increased year-on-year. The net profit margin of 0.9/1.0/1.1/0.2ppto decreased significantly, and the net operating cash outflow decreased. The net interest rate of 1H21/2Q21 decreased by 2.8ppt/ to 20.7% and 20.9% respectively compared with the same period last year. The net operating cash outflow of the company was 2758 / 16.9 million yuan, which was 2188 / 14.41 million yuan less than that of the same period last year.
Development trend
Multiple policies superimposed to promote the transformation of intelligent water services. In the first half of the year, the outline of the Development Plan of China's Water Meter Industry during the 14th five-year Plan was released, which pointed out that China's water meter industry was in a period of transition to the 2.0 stage of intelligent water meter. Superimposed with a number of policies such as new urbanization, smart city and water-saving city construction, we expect that the water meter industry will usher in upgrading and transformation, and intelligent infiltration will accelerate the development.
Smart meter business continues to infiltrate and actively extend the intelligent water industry chain. 1H21's smart meter business accounted for 56.0% of total revenue, an increase of 2.2ppt over the same period last year. The company has the advantage of NB-IoT smart meter first, while actively arranging smart meter promotion. During the reporting period, the company acquired Sanchuan Technology as a wholly-owned subsidiary with 57 million yuan, and Sanchuan Science and Technology promised a total net profit of not less than 24 million yuan for 21-23 years. In addition, the company actively strengthens the construction of intelligent water platform and strengthens customer stickiness.
Profit forecast and valuation
We maintain the 2021 / 2022 EPS forecast of 0.24 pounds 0.28 yuan. The company's current stock price corresponds to 18.9 times PE in 2021 / 2022 21.9 pound. We maintain the target price of 5.74 yuan, corresponding to 24.0 in 2021 / 2022, 20.5 times Pmax E, with 10% upside space. Maintain the "outperform industry" rating.
Risk
The promotion of smart water meters is not as expected.