Key points of investment:
Incident: The company released its report for the third quarter of 2018. The company achieved operating income of 859 million yuan in the first three quarters of 2018, an increase of 24.07% over the previous year; net profit attributable to shareholders of the parent company was 143 million yuan, an increase of 22.75% over the previous year.
The single-quarter results reached a record high, and the pressure on financial expenses was reduced. The company's single-quarter revenue in the third quarter reached 332 million yuan, an increase of 31.58% over the previous year, and Guimu's net profit reached 61.1201 million yuan, an increase of 29.45% over the previous year. The operating income and net profit for the single quarter reached record highs. Despite the rise in raw material prices, the company's overall profitability remained stable, with a gross profit margin of 27.98% in the first three quarters (33.01% in 2017) and a net profit margin of 16.62% (17.07% in 2017). Since the company's export business accounts for a relatively high share (overseas revenue accounted for 62.26% in 2017) and is mostly settled in US dollars, exchange rate fluctuations will affect the company's performance to a certain extent. Affected by the recent devaluation of the RMB, the company's financial expenses in the first half of the year were -288.436 million yuan, compared to 4,7826 million yuan in the same period last year. The pressure on financial expenses was drastically reduced, driving the company's operating performance to continue to improve.
Downstream demand continues to be booming, and prepaid accounts remain high. The company received 179 million yuan in advance accounts in the first three quarters, which generally remained at a high level in recent years. Affected by the increase in raw material prices, the company prepared some raw materials. The inventory reached 630 million yuan in the first three quarters of 2018, an increase of 68.04% over the previous year. There was a large increase in raw materials and products. Affected by this, the company's operating cash flow was affected to a certain extent. Net operating cash flow in the first three quarters reached -142 million yuan. Since this year, the tank container market has continued to pick up. The volume of container purchases by the world's largest container rental companies is superior to previous years. The company added bulk orders from customers such as Raffles, Tyf Leasing, and Haite Leasing.
The construction of the fund-raising project went smoothly to support future performance growth. After more than a year of infrastructure and equipment installation and commissioning, the company's tank container expansion project was officially put into operation on May 19. After the expansion of production, the actual production capacity of the company's tank containers will exceed 10,000 units/year. Meanwhile, the company's cold chain equipment expansion project is progressing intensively and in an orderly manner. The process layout and main equipment orders have been completed, and plant construction is expected to be completed by the end of the year. The successive commissioning of fund-raising projects will help ease the company's production capacity bottlenecks, further strengthen the company's position in the tank container and frozen equipment industry, and provide support for the company's future performance growth.
Profit forecast and investment rating: We expect the company to achieve revenue of 1,281 million yuan, 1,598 million yuan and 1,988 million yuan respectively from 2018 to 2020; the net profit of the mother is 213 million yuan, 288 million yuan and 350 million yuan respectively; EPS is 101 yuan, 1.36 yuan and 1.66 yuan respectively, and the corresponding PE is 15X, 11X and 9X respectively. The company was given a target price of 20.2 yuan for 6 months, maintaining the “Highly Recommended” rating.
Risk warning: 1. Production capacity release progress falls short of expectations; 2. The RMB exchange rate fluctuates greatly; 3. Trade protectionism continues to heat up.