Net profit in the first three quarters fell sharply by 34.9%, and the performance was in line with expectations. In the first three quarters, the company achieved sales revenue of 6.287 billion yuan, down 33.5% from the same period last year, and the net profit attributed to the parent company was 349 million yuan, down 34.9% from the same period last year, corresponding to 0.44 yuan in EPS.
The sharp decline in sales of leading products is a drag on the sales scale of the main business. Since the beginning of this year, due to the sharp decline in railway infrastructure investment and real estate regulation, the demand for earthwork machinery has shrunk. From January to September, the overall sales of China's excavator and loader industry decreased by 36.9% and 28% respectively, while the company's excavator and loader sales of 2298 and 17700 units decreased by 38.9% and 43.2% respectively, far exceeding the industry average. Market share has further declined, and the sharp decline in the company's leading products has seriously dragged down the decline of enterprise sales scale.
The proportion of miniaturization of product sales has increased, and the comprehensive gross profit margin has dropped sharply. During the reporting period, the company's comprehensive gross profit margin was 12.7%, down 3.9 percentage points from the same period last year, and 2.2 percentage points lower than the first half of the year, of which the single-quarter gross profit margin in the first three quarters was 19.3%, 15.9% and 13.4%, respectively. This is mainly due to a significant increase in the proportion of leading products selling small-tonnage products, while low capacity utilization weakens the scale effect in the case of shrinking demand.
The drastic reduction of shares in Societe Generale Securities has led to a surge in investment income to hedge against a huge decline in main profits. In the first three quarters, due to the reduction of shares in Societe Generale Securities, the company recognized investment income of 389 million yuan, an increase of 367 million yuan over the same period last year, accounting for 99% of the current operating profit, contributing to the company's net profit of 330 million yuan, corresponding to 0.41 yuan per share. Almost all of the company's net profit comes from investment income. If the company's net profit after deducting investment income is only 18.7 million yuan, the year-on-year decline will be as high as 95%.
Accounts receivable continued to increase, and the shortage of funds did not improve. During the reporting period, the balance of the company's accounts receivable was 5.276 billion yuan, an increase of nearly 2 billion yuan over the beginning of the year and 180 million more than the end of the first half of the year. Due to insufficient start-up of downstream projects, the repayment ability of customers decreased and the payback period was extended. Due to the continuous increase in receivables, the company had a net operating cash outflow of 1.025 billion yuan, compared with 980 million yuan in the same period last year, and operating cash flow continued to deteriorate.
In the current period, the company's cash balance is 503 million yuan, while short-term loans reach 1.77 billion yuan, cash matching is very tight.
Profit forecast and investment rating. The prosperity of the construction machinery industry continues to decline, and there is no sign of significant improvement in the industry fundamentals in the fourth quarter. We have lowered the company's performance forecast. It is estimated that the company will achieve a net profit of 359 million yuan, 190 million yuan and 230 million yuan from 2012 to 2014, an increase of-37.4%,-46.9% and 22%. We maintain a "neutral-A" rating.
Risk hint: the growth rate of real estate and infrastructure investment continues to decline more than expected; the sales payback period is extended, and the rising overdue rate of customers increases the risk of bad debts.
