Events: the company released its quarterly report for 2018 on April 28, with revenue of 4.69 billion yuan, year-on-year + 11.0%, and net profit of 80 million yuan, + 26.0% compared with the same period last year.
The performance grew steadily in the first quarter, and the expense rate remained stable.
2018Q1 achieved revenue of 4.69 billion yuan, year-on-year + 11.0%; net profit of 80 million yuan, + 26.0% year-on-year; and company comprehensive gross profit of 18.1%, year-on-year + 0.1pct, compared with 2017 + 0.6pct, remained stable as a whole. The company expense rate is 15.3%, year-on-year-0.4pct, and remains relatively stable. The monetary capital of the company is 3.99 billion yuan, which is-30.9% higher than that at the beginning of the reporting period, mainly due to the increase in monetary capital expenditure such as the payment of production, manufacturing and materials for the company's new construction projects, and the repayment of bank loans. The advance payment is 1.53 billion yuan, which is 47.2% higher than that at the beginning of the reporting period, and the amount received in advance is 770 million yuan, which is 30.2% higher than that at the beginning of the reporting period. This is mainly due to the increase in the contract payment received in advance in the current period of the company and the increase in the purchase of production materials paid in advance for new construction projects.
The dominant position of port machinery is prominent, and the automatic terminal is expected to bring new opportunities. The company's port machinery products have been the first in the global market share for 19 years in a row, and the quayside crane, the core product of port machinery, accounts for more than 80% of the global market share, which is a well-deserved overlord in the industry. Due to the obvious post-trade cycle nature of Hong Kong machinery, the downturn in global trade in 2015-16 led to a decline in port machinery orders in 2016-17, with new contracts signed in 2017 worth US $2.52 billion, down 3.7 per cent from the same period last year. On the one hand, the recovery of the global economy has brought about an obvious trend of recovery in the overall market, on the other hand, the demand for new ports and terminals along the "Belt and Road Initiative" route, shipping center and free trade port construction, renewal demand and other factors will drive the market demand for port machinery and equipment. At the same time, the automation of port machinery is the inevitable trend of the development of the industry. the newly built terminal project and the renewal demand of the old terminal in many areas are expected to bring huge increment of automatic terminal equipment. The company is a leading enterprise in the field of automated terminals. With the development and expansion of automated terminals, this business is expected to become a new growth point of the company. It is expected that the orders and revenue of port machinery will be reversed in 2018.
The risk of marine equipment has been cleared, and China's convertible bond project helped to boost the global marine industry in 2017, resulting in substantial asset impairment, totaling 3.19 billion yuan from 2013 to 2016. The impairment loss of the company's assets in 2017 totaled 820 million yuan, a decrease of 400 million yuan compared with 2016, and the provision of the marine sector has been basically completed. In addition, China Communications and Construction has previously issued a convertible bond plan, of which 2.46 billion yuan is intended to be invested in the purchase of engineering ships. According to the official website of Zhenhua heavy Industry and other public materials, Zhenhua heavy Industry has actively participated in a number of proposed purchase of equipment. The amount of convertible bonds is 72.8% of the company's marine revenue in 2017. the company has a core competitive advantage in a number of engineering ship projects. China's convertible bond project is expected to help thicken the company's marine equipment sector performance.
Fully develop the post-machine market of the port, and re-develop the leading advantage
According to Cargotec and other authoritative organizations, the current stock of port machines in the world is more than 4000, and the demand for maintenance caused by aging equipment and the replacement of some consumable materials is large, which is equivalent to the new demand for Hong Kong machinery every year. At present, the port machinery aftermarket industry is loose, the supply mode is backward, the terminal needs to employ a large maintenance team for a long time, and its spare parts supply also needs to face hundreds of suppliers in the whole market. On the other hand, the quayside crane, the core product of Zhenhua's port machinery, accounts for more than 80% of the global market share. after the company enters the port machinery market, it can provide global customers with high-quality and efficient original parts and services, and effectively solve the pain points faced by the terminal company. Therefore, the company will once again give play to its leading advantages on the new platform, open up and lead the post-machine market of Hong Kong.
Profit forecast and investment rating: the company has been in an absolute leading position in the port machinery industry, coupled with the vast market space for automatic terminals and port machinery spare parts, and the marine industry is more fully cleared, and the prosperity of the marine industry has rebounded. Under the condition that other sectors go hand in hand, we expect that the company's performance has entered an upward channel. It is estimated that the company's net profit in 2018-20 is 507 million, 805 million, 1.21 billion yuan, corresponding to EPS0.12, 0.18,0.28 yuan, corresponding to PE 43,27,18X. Maintain a "buy" rating.
Risk hint: the post-machine market development of Hong Kong is not as expected, and the recovery of global trade is lower than expected.