3Q18 performance is lower than expected.

New time announced 1~3Q18 results: operating income of 2.727 billion yuan, an increase of 5.7% over the same period last year; net profit of 52 million yuan, down 67.5% from the same period last year, corresponding to a profit of 0.08 yuan per share.

In the single quarter of 3Q18, the company's revenue was 908 million yuan, down 5.2% from the same period last year, and its net profit was 29 million yuan, down 53.0% from the same period last year, which was lower than expected, mainly due to weak downstream demand.

The rate of management and financial expenses has risen, and profitability has declined: 1~3Q18 's overall gross profit margin was 20.4%, down 2.9ppt from a year earlier. 3Q18 gross profit margin was 20.9%, down 2.3ppt from the same period last year. The sales / management / financial expense rate of 3Q18 is 6.2%, 10.7% and 2.2% respectively, down 0.5 / up 1.2 / rising 0.6ppt, respectively. The increase in financial expenses is mainly due to the increase in interest expenses caused by the company's issuance of convertible bonds; the net interest rate of 3Q18 is 3.1%, which decreases 3.2ppt compared with the same period last year.

Operating cash flow is net outflow. 3Q18 operating activities changed from net inflow to net outflow of 213 million yuan compared with the same period last year, mainly due to a decrease of 324 million yuan in notes payable and accounts payable of 3Q18 compared with the end of the first half of the year.

Trend of development

The monthly output growth rate of industrial robots turned negative for the first time. In September 2018, national industrial robot production fell 16.4% from the same month last year, a sharp drop in 25.4ppt compared with August. Affected by the decline in industry demand, the payback of some robot projects in Xinshida has also slowed down.

The growth rate of real estate sales is declining, and the elevator business is facing uncertainty. The area of real estate sales increased 2.9% from January to September 2018 compared with the same period last year, which is lower than the growth rate of January-August by 1.1ppt. Affected by the decline in the growth rate of the real estate market, the prosperity of the elevator industry is under pressure.

The company's 2018 performance guidance fell short of expectations. The company expects the net profit of 2018 to be 0.34 billion yuan and 76 million yuan, down 75% and 45% from the same period last year.

Profit forecast

Considering the lower-than-expected growth rate of the company's sales of robots and elevator products, the 19-year profit forecast for 2018 will be reduced by 25.0% from 0.16% 0.22 yuan to 0.12% 0.17 yuan.

Valuation and suggestion

The current share price of the company corresponds to 18max, 43max, 1919, and 30x Pmax E. As we downgraded our earnings forecast and taking into account the recent correction in the valuations of the automation and robotics industries, we lowered the target price by 27.5% to 6.30 yuan, corresponding to the 1919 52xPmax E of 18Unip, and maintained the recommended rating, which has 21% room for the current share price.

Risk

The release of robot production capacity is not as expected.