2018Q1 performance meets expectations
The company announced the first quarterly report of 2018, 2018Q1 achieved operating income of 295 million yuan (+ 211%), net profit of 88 million yuan (+ 40.3%), deducting non-net profit of 82 million yuan (+ 341%), corresponding to EPS0.86 yuan, the performance is in line with our expectations. The reason for the substantial increase in the company's performance is due to the increase in sales revenue of the diamond line products, and we expect that the technical reform will lead to a rise in the net interest rate, which verifies our judgment on the volume growth of the company's diamond line. It is estimated that the 18-20 year net return to the mother is 3.63 million yuan, and the 2018 target price is 121.04-128.16 yuan, maintaining the "overweight" rating.
The growth rate of 2018Q1's net profit is about twice that of revenue, and the rise in gross profit margin leads to a net profit increase of 403% year-on-year, revenue growth rate of 211%, and net profit growth rate of about twice the revenue growth rate. In 2017, the net profit margin and gross profit margin for the whole year of 2017 were 23.87% and 41.46% respectively. The net profit margin and gross profit margin of 2018Q1 were 29.82% and 48.45% respectively, increasing by about 6pct and 7pct respectively. We expect that the technical transformation of the diamond line may lead to an increase in production capacity and production efficiency, and a reduction in manufacturing costs may lead to a reduction in costs.
The annual production capacity of the diamond line is 8 million km, and the cost per unit length is lower than 30% of the same company. the annual production capacity of the diamond line is 8 million km, which has obvious advantages in scale. According to the annual report, the average sales prices of Dale new materials and San Chao new materials diamond line products in the same industry were 183.7 yuan / km and 194.5 yuan / km respectively, both higher than 162.2 yuan / km of the company. On the other hand, the cost prices of San Chao new materials and Dale new materials per kilometer are 100.5 yuan and 94.50 yuan respectively, both of which are higher than the company's cost price of 71 yuan per kilometer. The company has obvious advantages in technological transformation, the cost is 30% lower than that of competitors in the same industry, and the gross profit margin is about 8pct.
Net cash flow from operating activities decreased by 210%
The net cash flow of 2018Q1's operating activities was-25.97 million yuan, down 210% from the same period last year; the balance of bills receivable was 97.88 million yuan, an increase of 222% over the same period last year. The main reasons for the net cash flow of the company's operating activities from positive to negative are as follows: 1. The sales of the diamond line are expanded and settled by bank acceptance drafts; 2.
The amount of accounts received in advance is reduced by 30.37% due to the delivery of goods by advance sales and settlement enterprises. Accounts receivable reached 367 million yuan, an increase of 13.84 million yuan over the annual report of 353 million yuan in 2017. The purchase of raw materials increased, and the adoption of advance settlement resulted in an advance balance of 96.22 million yuan, an increase of 17.35 million yuan over the annual report of 78.87 million yuan in 2017.
Net interest rate increases 6pct, maintains "overweight" rating
The production capacity of the company's 2018 annuity rigid line has expanded to 8 million km. It is estimated that the company's 18-20-year operating income will be RMB 1589max 2017max RMB 2.477 billion, its parent net profit RMB 3.63pm RMB 443pm 463 million, and the corresponding EPS RMB 3.56pm 4.34pm 4.54 yuan respectively. In view of the company's fine diamond wire diameter, strong competitiveness, high performance growth rate, as well as the R & D advantages of ultra-fine process platform and new product reserve. It will be given 34-36 times PE in 2018, corresponding to the target price of 121.04-128.16 yuan, and maintain the "overweight" rating.
Risk tips: the risk of high customer concentration; 18 years of oversupply on the Kumgang line leads to a sharp drop in prices; the risk of rising raw material and labor costs; fierce market competition and unsmooth market expansion; the risk that production capacity does not meet expectations; the continuing operating risk caused by tight cash flow; the risk of bad debts caused by excessive accounts receivable.