2018 annual results are in line with expectations
North Pakistan Media announced 2018 annual results: operating income of 4.79 billion yuan, an increase of 17.24%; net profit of returned mother was 103 million yuan, a decrease of 0.06%; net profit of non-return mothers was 84 million yuan, an increase of 17.83%. The company will distribute a cash dividend of 0.11 yuan/share. Automobile 4S store business revenue increased 15.6% to 3.57 billion yuan, and charging business revenue increased 606% to 349 million yuan. Revenue from the media business declined slightly. Overall gross margin declined by 0.6%. The performance was in line with expectations, and the charging business grew strongly.
Development trends
The bus charging business is growing strongly, and the implementation of the third phase of the project will further drive growth. The company already has 102 charging stations and 587 bus charging stations. We expect a total charging power of nearly 260,000 kW. Total charging capacity reached 195 million kilowatts and revenue was 349 million yuan in 2018, a sharp increase of 606% over the previous year. The price of a single kilowatt hour of electricity is 1.79 yuan, including the electricity bill of 0.81 yuan and the service charge of 0.98 yuan. The service fee level is at a high level in the charging industry. We estimate that the average usage rate of charging stations is 10.3%, and there is still room for further improvement. Currently, the total progress of the third phase of the charging station project is about 55.62%. We expect the scale of charging stations to expand further in 2019. With the continuous increase in the number of pure electric buses owned by the Beijing Public Transport Group, the charging business will continue to experience high growth.
Car sales bucked the trend. The company's 4S car shop business sold a total of 12,844 cars in 2018, with revenue of 3,238 billion yuan, an increase of 17.49%. The price of bicycles was 252,000 yuan, an increase of 21,000 yuan over the previous year. We believe that the company's 4S stores mainly operate middle and high-end joint venture brands and were relatively less affected by the overall car market decline in 2018. With the completion of the construction of the new 4S store in '19, revenue is expected to grow steadily.
It is difficult for the driving school business to improve; it continued to decline in 2018. The revenue of the driving school business fell 29.05% to 171 million yuan in 2018, and gross margin fell 18.73pct to 13.84% year on year.
Profit forecasting
We maintained a net profit of $145 million in 19e and introduced a net profit of $169 million in 2020e.
Valuation and advice
The current stock price corresponds to 28/24x P/E in 19/20. Considering the high growth potential of the bus charging business and the recovery of the market valuation center at the same time, we raised the target price by 30.9% to 6.1 yuan. Corresponding to the 19/20e 33/29x P/E, there is 19.8% upward room, maintaining the recommendation.
risks
Charging station usage fell short of expectations, and car sales at 4S stores fell short of expectations.
