2017 performance was lower than expected

Daleng shares announced its 2017 results: operating income was 2.08 billion yuan, up 9.8% from the same period last year, and net profit belonging to the parent company was 200 million yuan, up 10.2% from the same period last year. The corresponding earnings per share is 0.23 yuan, which is lower than expected, mainly because the synergy effect after management integration has not been fully reflected.

The management is determined to forge ahead and the main business continues to improve. In 17 years, the company's refrigeration equipment and other business income was 2.04 billion yuan (+ 9.1% Universe 76.4%). The gross profit margin of refrigeration equipment / other business is 20.5% and 49.5% respectively, which increases 1.6/1.1ppt respectively. The company's comprehensive gross profit margin is 21.0% (+ 2.1ppt YOY). The 17-year management expense rate was 11.1%, a decrease of 0.5ppt over the previous year. Operating profit (excluding investment income) was 36 million yuan, a substantial turnround from loss to profit.

The effect of business integration is gradually reflected, and the management efficiency and profitability continue to improve.

Operating cash flow needs to be improved. In 17 years, there was a net cash outflow of 210 million yuan from operating activities, an increase of 200 million yuan over last year, mainly due to an increase in cash expenditure on the purchase of goods and services.

Trend of development

Transformation and upgrading, profitability continues to improve. The relocation and transformation of the company has been completed in 17 years, the new factory is highly intelligent, and the operational efficiency is expected to increase by 15%, leading to the improvement of the company's profitability and management efficiency. It is optimistic that the rate of management expenses will fall below 8% in the future.

Server-side business development has achieved remarkable results. In the year 17, revenue from emission reduction and gas compressor products and maintenance services increased by more than 50% compared with the same period last year; cold chain logistics signed more than 10 million of more than 20 new contracts. With the improvement of the company's service layout, the server-side business is expected to continue to develop.

The business of parent and subsidiary companies continued to grow steadily. The operating income and homing net profit of 1Q18 were respectively 52G / 0.26 million yuan, up 2.1% / down 26.8% (after 1Q17 performance adjustment) or 8.5% / down 23.1% (before 1Q17 performance adjustment). The company's net profit fell, mainly because 1Q17 received a cash dividend of 11.15 million yuan from Guotai Junan. Excluding the impact of dividends, 1Q18's homed net profit rose 7.4 per cent year-on-year.

Profit forecast

Considering that the 17-year performance was lower than expected, we reduced our 2018 Universe 19e profit forecast by 18.3% to 0.29Universe 0.32 from 0.35 to 0.38.

Valuation and suggestion

The company's current share price maintains a recommended rating of 16.1 in 1919, corresponding to 14.4 times Ppace E. Due to the downward revision of the profit forecast and the downward shift of the industry valuation center, the target price will be lowered from 9.6 yuan to 5.8 yuan, corresponding to 18 times of 18, 19, 20, and 18 times Pmax E, with 24.7% space compared with the current one.

Risk

The development of cold chain industry is not as expected.