The performance in 2018 fell short of expectations
The company announced 2018 results: revenue 44.5 billion yuan, YoY+14.72% (adjusted, the same below); return net profit 670 million yuan, YoY-19.68%; deducted non-return net profit-170 million yuan, loss narrowed; performance lower than expected, mainly due to the decline in gross profit margin and asset impairment loss exceeded expectations. The company announced 1Q19 results: revenue 6.065 billion yuan, YoY-0.82%; return net profit 530 million yuan, YoY+92.9%, year-on-year increase mainly due to investment income increased by 990 million yuan; deduction of non-return net profit-530 million yuan, YoY-309%.
Revenue rose but gross profit margin fell. Revenue increased by 15% in 2018, mainly due to last year's low base (deduction of income from the termination of marine contracts in 2017) and a consolidated gross profit margin of 10%, down 2ppt from the same period last year. From a sub-business point of view: 1) Marine defense and marine development equipment income of 15.9 billion yuan (YoY+74%), gross profit margin of 2% (YoY+4ppt), mainly due to the termination of marine contracts in the same period last year to reduce income and costs; new orders of 10.7 billion yuan (YoY-47%) in 2018. 2) Marine transport equipment revenue of 11.1 billion yuan (YoY-14%), gross profit margin of 15% (YoY-1.54ppt), and new orders of 11.8 billion yuan (YoY+16%) in 2018. 3) Deep-sea equipment and warship repair and refitting income of 6.3 billion yuan (YoY+31%), gross profit margin of 15% (YoY-6ppt); new order of 4 billion yuan (YoY+18%) in 2018. 4) the revenue of warship accessories and mechanical and electrical equipment is 7.2 billion yuan (YoY-13%), the gross profit margin is 10% (YoY-1 ppt), and the new order in 2018 is 12.2 billion yuan (YoY-41%). 5) the income of emerging industries in the military-civilian integration strategy is 3.5 billion yuan (YoY+5%), and the gross profit margin is 19% (basically flat). By the end of December 2018, new orders totaled 42.1 billion yuan, YoY-26%; handheld orders totaled 124.5 billion yuan, and YoY-14%.
Trend of development
Pay attention to the progress of military industry, military trade and high value-added shipping business, and look forward to the inflection point of business performance.
In 2018, China's first domestic aircraft carrier completed many sea trials, and the new destroyers advanced steadily; the company's projects built for Thailand, Bangladesh and other countries advanced as scheduled; and civil ships actively expanded the construction of high value-added ships. high value-added ships account for 23.19% of profits. We are optimistic about the growth prospects of naval equipment and high value-added ships, and look forward to the inflection point of business performance.
Profit forecast
Adjust the forecast of income, gross profit margin and investment income, keep the profit forecast for 19 years unchanged, and introduce the net profit forecast of 1.59 billion yuan in 2020.
Valuation and suggestion
The current share price corresponds to 19company20e 1.54apt 1.52x PUnix B. Maintain the recommendation, taking into account the recent shift in the valuation center of the ship plate, raising the target price by 13% to 6.75 yuan, corresponding to 19/20e1.80/1.78x Pamp B, a potential increase of 17%.
Risk
Uncertainty of steel price and exchange rate changes; uncertainty of military orders and delivery.