Report guide
In the third quarter of 2018, the company achieved operating income of 199 million yuan, an increase of 3.3% over the same period last year, and its net profit was 30.67 million yuan, up 9.49% from the same period last year.
Main points of investment
Profitability continued to pick up in the third quarter
In the third quarter of 2018, revenue reached 199 million yuan, an increase of 3.3% over the same period last year, and the net profit returned to the mother was 30.67 million yuan, up 9.49% from the same period last year. In addition, the devaluation of the RMB and the decline in raw material prices have led to an increase in profitability. The gross profit margin in the third quarter increased to 27.15% compared with the second quarter, 2.11pcts increased to 27.15%, and the net profit margin increased to 15.44% compared with the second quarter. Based on the fact that the company has established long-term and stable cooperative relations with more than 100 customers in Africa, Asia, Europe and other regions, the company will not only further consolidate and enhance foreign market share, but also speed up the development of domestic and Asian markets, and enhance the size and market influence of the company.
Convertible bond fundraising completed, production capacity is expected to double
In order to implement the project with an annual production capacity of 2 million submersible pumps, including 1.8 million well submersible pumps and 200000 solar submersible pumps, the company announced in September 2017 that it would raise matching funds through the issuance of convertible bonds; 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 2 million submersible pump project 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. Among them, the whole product value of the new solar pump (pump + inverter) is about 3000 yuan, which is 6 times the unit price of the well submersible pump, and the product value is higher, which further enhances the company's profitability.
Profit forecast and valuation
In view of the slow progress in opening up new markets and the impact of rising raw material prices, we lower our profit forecast. It is estimated that the company's revenue from 2018 to 2020 will be 898 million yuan, 1.097 billion yuan and 1.382 billion yuan, with year-on-year growth rates of 8.49%, 22.10% and 26.01%. The net profit of returning to the mother was 116 million yuan, 130 million yuan and 153 million yuan, up 0.45%, 11.43% and 17.82% respectively. EPS is 0.58 yuan per share, 0.63 yuan per share, 0.72 yuan per share, corresponding to PE is 18.1,16.2,13.8 times, maintaining the "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.
