2018 performance is in line with expectations

Tianneng Power announced 18-year results, revenue of 34.552 billion yuan, an increase of 28%, and a net profit of 1.25 billion yuan, an increase of 6.3%. The gross profit margin was 11.8%, down 1.2pct from the same period last year. Basically in line with our expectations.

Trend of development

Performance is basically in line with expectations, we think the company's core focus is: 1) maintenance and replacement market share is expected to further increase, 2) recycled lead business growth, 3) lithium power production is expected to shift to supporting the new national standard bicycle OEM manufacturers. The core competitiveness lies in: 1) continuous channel optimization and strong synergy, 2) excellent operation ability.

Electric bicycle battery business is growing steadily, and the operating capacity reflects the competitiveness of management. Revenue from the bicycle battery business also increased by 21.1%, maintaining a growth rate of more than 15% for four consecutive years. We believe that by strengthening the control of sales channels, the company continues to replace the market, and the increase in market share drives revenue growth. Gross margin is expected to decline due to lead prices and competition.

In addition, the revenue of the low-speed electric vehicle business in the past 18 years was 2.046 billion yuan, an increase of 38.6%. In terms of operating capacity, the receivable turnover is 10 days, the inventory turnover is 32 days, and the channel management is more efficient.

Lead recycling business benefit channel coordination and capacity expansion to maintain high growth. Revenue from renewable resources business also increased by 32.81%. At present, the industry has ushered in strong supervision, promoting the regularization of recycling and clearing backward production capacity. The company's battery recycling capacity is expected to further increase from the current 400000 tons to 700000 tons. Benefiting from the coordination of sales channels and recycling channels, the company expects to steadily increase the amount of recovery and reduce channel costs, driving the rapid growth of recycled lead business and reducing battery business costs.

Lithium power business adjustment power point. Lithium business is down 54.8%. We think the company will focus on the lithium demand of bicycles under the new national standard and the lithium demand of low-speed / A00-class electric vehicles.

Profit forecast

Considering the decline in the gross profit margin of lead-acid batteries, we reduced the net profit of 19e by 17.3% to 1.42 billion yuan, and introduced a net profit of 1.61 billion yuan by 20e.

Valuation and suggestion

The current share price corresponds to the 1920 5.4Accord 4.8x Pmax E, which reduces the TP by 16.7% from HK $12 to HK $10, and corresponds to the 19Compact 20e 7.0There is 29.9% room to rise, so the recommendation is maintained.

Risk

The market share of maintenance and replacement is not as expected, and the amount of battery recovery is not as expected.