Event: the company released its three-quarter report in 2018, of which the operating income in the first three quarters was 1.31 billion yuan, an increase of 54.94% over the same period last year, and the net profit was 14 million yuan, an increase of 116.29% over the same period last year. Q3 achieved operating income of 516 million yuan, an increase of 8.81% over the same period last year, and realized net profit of-10 million yuan, an increase of 39.34% over the same period last year.
In the first three quarters, the company spun off its lossmaking assets and focused on the rail transit business. In June this year, the company sold a 60 per cent stake in Xinzhu Tonggong, a wholly owned subsidiary, to the group at a price of 51 million. The main business of Xinzhu Tonggong is the manufacture and sale of passenger cars, trucks and other vehicles, with a net profit of-37 million yuan in 2017. This divestiture will help the company to focus more on rail transit business and seize the great opportunity of fully developing urban rail transit in our country. During the reporting period, the amount of notes receivable and accounts receivable brought about by the sales of the company's rail transit business increased by 480 million yuan, an increase of 39.92% over the same period last year.
With the introduction of Sichuan SASAC, the company will be able to take orders in the future. "Please climb another tall building." On April 12, the company signed a share transfer agreement with Sichuan Development (Holdings) Co., Ltd., which is the actual controller of Sichuan SASAC. On May 23, the company signed the "embedded medium and low speed maglev rail transit system strategic cooperation agreement" with the second China Railway Institute affiliated to China Rallway. The two sides will carry out in-depth cooperation in the field of research and development and promotion of medium and low speed maglev. At the same time, the company invested 680 million yuan in the construction of a medium and low speed maglev test line (construction started in June 2018, and the first phase is expected to be completed and put into use in June 2019). Carry on the experiment and promotion. Under the background of the huge demand exposure of domestic urban rail transit, the low-cost, efficient and self-controllable rail transit form has a broad market space, and the medium-and low-speed maglev is expected to become a new profit growth point of the company in the future.
Speed up the expansion of business outside the province, and the future performance prospects will be even broader. In June this year, the company signed the Cooperation Agreement on Super Capacitor Industry and Rail Transit Industry with the people's Government of Fuyang City. According to the contents of the agreement, we judge that Fuyang City will have the demand for purchasing supercapacitor buses and building medium-and low-speed maglev tourism demonstration lines in the future. At that time, the company is more likely to participate in related projects, which is expected to enhance the company's brand influence outside the southwest region and thicken the company's performance at the same time.
Investment suggestion: based on the upward judgment of the medium-term trend of the urban rail transit industry, we are optimistic about the ability of the company's rail transit business to radiate the surrounding provinces from the southwest region. We estimate that the operating income of the company from 2018 to 2020 will be 2.728 billion yuan, 3.851 billion yuan and 5.04 billion yuan respectively, and the net profit will be 39 million yuan, 192 million yuan and 252 million yuan respectively. Corresponding to 2018-2020 PE is 78x, 16X, 12x, upgraded to the "buy" rating.
Risk tips: rail transit business progress is not up to expectations; supercapacitor business promotion is not up to expectations; other risks.