1H18 performance is in line with expectations

Xinshida announced 1H18 results: operating income of 1,820 million yuan, up 12.1% year on year; net profit of 23 million yuan, down 76.3% year on year, corresponding to profit of 0.04 yuan per share.

Profit statement: The company's overall gross margin for the first half of 2018 was 20.5%, a year-on-year decline of 3.2ppt. Due to interest accrued on new convertible bonds, the financial expense ratio increased by 1.1 ppt year on year; overall, in the first half of the year, the company's net interest rate was 1.3%, down 4.8 ppt year on year.

Balance sheet: Compared with the beginning of this year, the company's accounts receivable increased by 260 million yuan and accounts payable increased by 200 million yuan, all in line with the increase in revenue; the balance ratio decreased by 2.8ppt to 49.7%. The company's current goodwill was higher at 1.46 billion yuan, mainly due to the acquisition of Zhishan Intelligent Control in 2017.

Statement of cash flow: The company's net operating cash flow increased by 67 million yuan to 299 million yuan.

Development trends

Cooperate with JD on intelligent logistics equipment to expand growth space. In June 2018, the company and JD signed a strategic cooperation agreement. The two sides will establish comprehensive cooperation in the fields of smart logistics and robotics. On the one hand, Xinshida will make full use of its technical advantages in elevator control systems and conduct in-depth research in the field of interaction between elevators and service robots; on the other hand, it will use its advantages in the field of robotics to develop products such as intelligent transportation and distribution robots. Looking ahead, relying on JD's extensive logistics service needs, the company's intelligent equipment will usher in great room for development.

Robot production capacity is gradually expanding. At the end of 2017, the company issued convertible bonds to raise funds to expand the robot business production capacity. The fundraising project is expected to add 13,500 units/year after the robot and key component and motion control system product intelligent manufacturing project is expected to be put into operation at the end of 2018, increase the production capacity of motion control systems and servo drive systems, and contribute to increased revenue.

Profit prediction

Considering that the company's robot sales growth rate was lower than expected, the 2018 profit forecast was lowered by 58% from 0.39 yuan to 0.16 yuan, and the 2019 profit forecast of 0.22 yuan was introduced.

Valuation and recommendations

The company's current stock price corresponds to 39.9/29.6 times P/E in 18/19. Considering that valuations in the automation and robotics industry have declined a lot recently, the target price was lowered by 54% to 8.69 yuan, corresponding to 54/40 times P/E in 18/19. The valuation is low, maintaining the recommended rating, and there is room for 35% corresponding to the current stock price.

risks

The release of robot production capacity fell short of expectations.