Report guide
In the first half of 2018, the company achieved an operating income of 462 million yuan and a net profit of 53.74 million yuan. It is expected that the company's total production capacity will double again after reaching production.
Main points of investment
The performance slowed in the first half of the year, and profitability rebounded slightly in the second quarter compared with the first quarter.
Performance growth slowed and profitability rebounded slightly from the first quarter. In the first half of 2018, the operating income was 462 million yuan, an increase of 6.60% over the same period last year, and the net profit of returning home was 53.74 million yuan, down 17.29% from the same period last year. In addition, the revenue in the second quarter was 266 million yuan, an increase of 9.33% over the same period last year, and the net profit returned to the mother was 33.57 million yuan, down 16.71% from the same period last year. In addition, the price of raw materials remained high from January to May, while the exchange rate of the US dollar against the RMB depreciated against the same period last year, which had a greater impact on the company's profits. The net interest rate increased to 12.63% in the second quarter compared with the first quarter, and profitability rebounded slightly compared with the first quarter. According to statistics, the company has established long-term and stable cooperative relations with more than 100 customers in Africa, Asia, Europe and other regions. In the future, while further consolidating and enhancing the foreign market share, the company will speed up the development of the domestic market and the Asian market, and enhance the company's size and market influence.
Fund-raising projects are advancing steadily, and production capacity is expected to double.
Convertible bond financing has been completed and production capacity is expected to double. In order to implement the annual production capacity of 2 million submersible pumps, including 1.8 million well submersible pumps and 200000 solar submersible pumps, the production capacity is expected to double again after reaching production. The company announced in September 2017 that the project would be implemented through the issuance of convertible bonds to raise matching funds, and some of the deficiencies would be solved by the company with its own funds or through other financing methods. In March 2018, the company issued convertible bonds approved by the CSRC. In August 2018, the company successfully issued convertible bonds, raised 281 million yuan, and the project of 2 million submersible pumps was steadily advanced. So far, the issuance of convertible bonds has been completed, and the fund-raising project has been carried out smoothly, with a total production capacity of 1.85 million sets. With the implementation of the fund-raising project, the company's total production capacity has reached 3.85 million units and the production capacity has doubled.
6 times the price of solar submersible pump, the product value is higher. Driven by market demand, the company's fund-raising project aims at complete sets of supply such as pumps and inverters. The whole product value of the new solar pump (pump + inverter and other complete sets of supply) is about 3000 yuan, which is 6 times the unit price of the well submersible pump. The product value is higher, further enhance the company's profitability. The implementation of the solar pump project is conducive to the enrichment of the company's product range and the improvement of profitability.
Profit forecast and valuation
It is estimated that the company's revenue from 2018 to 2020 will be 1.051 billion yuan, 1.267 billion yuan and 1.596 billion yuan, with year-on-year growth rates of 26.93%, 20.55% and 25.94% respectively, and the net profit will be 149 million yuan, 184 million yuan and 234 million yuan, respectively, with year-on-year growth rates of 29.00%, 22.84% and 27.41%, respectively. The EPS was 0.75,0.89 and 1.101 yuan per share, and the corresponding PE was 17.21,14.01,11.00 times, respectively. In view of the company's advantages in the field of well submersible pumps and its long-term layout in the solar pump market, we are optimistic about the future development of the company and maintain its "overweight" rating.
Risk hints: political and policy risks in product importing countries; domestic and foreign market development is not as expected; raw material prices continue to rise sharply.
