Events:
According to the 2018 semi-annual report of Zhongtai Automobile, the company achieved an operating income of 10.251 billion yuan, a year-on-year increase of 77.15%, and a net profit of 305 million yuan, an increase of 37% over the same period last year. The company sold a total of 115000 cars in the first half of the year, an increase of 8.2 percent over the same period last year, of which SUV sold 92000 vehicles, up 19.1 percent from the same period last year, 95000 passenger cars, 38 percent from the same period last year, and 12000 new energy vehicles, 1.5 percent from the same period last year.
Comments:
1. Competition in the industry intensified, and the company's gross profit margin was stable as a whole, declining compared with the first quarter. Car sales increased by 5.57% in the first half of 2018, which was high before and low after. The growth rate declined significantly in June, and competition in the industry intensified. Against this background, the company's gross profit margin fell slightly by 0.24% in the second quarter compared with the first quarter, while accounts receivable accounted for 16.63% of total assets, up 3.8% from the same period last year, and inventory accounted for 9.03% of total assets. 3.8% lower than the same period last year, the company is expected to accelerate inventory reduction.
2. The rate of management expenses and sales expenses of the company increases, and the profit growth rate is lower than the revenue growth rate. In the first half of 2018, the sales expense rate was 4.95%, the management expense rate was 5.61%, and the financial expense rate was 0.52%, which increased by 1.17%, 0.93% and-0.25% respectively over the same period last year. The consolidation of Yongkang Zhongtai in the second quarter of 2017 led to a substantial increase in revenue and return net profit. The increase in sales costs is due to the company's advertising expenses of 150 million to enhance the visibility of the company's products, and the increase in management costs is due to the increase in depreciation due to the consolidation of 439 million projects under construction. With the increase in the rate of sales expenses and management expenses, the increase in the net profit of the company's return to the parent is 37% less than the 77% increase in revenue.
3. Continuously improve the product power. The company sold a total of 92000 SUV vehicles in the first six months of 2018, an increase of 19.1% over the same period last year. Zhongtai automotive products have the following four characteristics to ensure rapid sales growth: first, excellent product power, Zhongtai will launch 10 new cars from 2018 to 2020, of which the company will launch four blockbuster models: T300EV, T500, T800 and T900 in 2018; second, good appearance, achieve the gorgeous transformation from imitation to independent design in appearance. Third, the configuration is rich, the newly listed models are rich in configuration, adding new technologies such as wireless charging, liquid crystal night vision system, electric suction doors, etc.; fourth, Zhongtai models often reduce dimension pricing, with obvious performance-to-price advantages.
4. It is estimated that the EPS from 2018 to 2020 is 0.68,0.71 and 0.76 yuan respectively, and the corresponding PE is 8.5,8.1,7.6 times respectively.
Risk hint: sales of new models are lower than expected; progress with Ford is slow.