This report is read as follows:
Under the tight credit environment, the contraction of garden business in 2018 dragged down the annual performance less than expected. The company intends to introduce state-owned assets holding to enhance the financing capacity and ensure the smooth landing of orders on hand.
Main points of investment:
Maintain and increase holdings. The total revenue in 2019 is 3.49 billion /-10%, the return net profit is 370 million /-39%, the total revenue in the first quarter of 2019 is 470 million /-32%, and the return net profit is 90 million /-31% lower than expected. Taking into account the company's balance sheet constraints and the impact of the actual controller may change, the forecast for 2019-2021 EPS is 0.28 EPS 0.32 RMB 0.36 yuan (the original 2019-2020 EPS forecast 0.34 pm 0.40 yuan) The growth rate is 13%, corresponding to the downgrade of the target price of RMB 5.50 (original CNY 5.8RMB) and the increase of the holding rating by 14 times PE from 2019 to 2021.
Lower garden revenue, improved operating cash flow and lower gross / net interest rate. 1) Q1-Q4 revenue growth rate 2119%, net profit growth rate 68%, net profit growth rate 68%, including auto parts income 1.27 billion / + 3%, garden income 2.18 billion /-17% X 2) operating net cash flow-120 million (+ 31%), cash to cash ratio 63.2% (+ 8.7pct) / cash to cash ratio 73.9% (+ 5.5pct). 3) gross margin 31.6% (- 2.6pct) / net margin 10.9% (- 5.0pct), sales rate 4.9% (+ 0.8pct) / R & D and management rate 10.6% (+ 3.2pct) / financial rate 5.4% (+ 2.2pct) 4) asset impairment loss of 60 million (+ 82 per cent), notes and receivables / total assets 12.2 per cent (+ 0.3pct), inventory / total assets 53.4 per cent (+ 1.3pct), asset-liability ratio 60.3 per cent (+ 1.7pct).
There are sufficient orders on hand, and the proposed introduction of state-owned assets holding is conducive to the stabilization of performance. 1) the controlling shareholder intends to agree to transfer 10 / 16% of the shares successively (price 6.2max 5.1 yuan). After the completion of the transaction, 21.46% of the shares invested in Weifang City become the controlling shareholder to enhance the company's financing capacity and business development ability; 2) the first phase of the company's spare parts board factory will be completed in 2018, which is conducive to the conversion and landing of various projects invested in the previous stage and enhance the company's manufacturing capacity and competitiveness. 3) at the end of 2018, the contract for the project under construction is about 7.9 billion yuan / about 2.3 times the revenue in 2018; 4) the company has bought back 9.96 million shares (accounting for 0.69% of the total share capital), with an average cost of 3.91 yuan per share.
Catalyst: social integration data continued to improve, PPP storage and landing continued to rise, environmental protection policy increased.
Risk tips: the growth rate of social finance has declined sharply, policies continue to rectify PPP, policies limit local debt, and so on.
