2018 performance was in line with expectations, while 1Q19 performance slightly exceeded expectations
Dinghan Technology announced its 2018 and 1Q19 results: the company's operating income in 2018 was 1.36 billion yuan, an increase of 9.8% over the same period last year; its mother's net profit was-577 million yuan, in line with the previous performance of KuaiBao.
1Q19's revenue was 330 million yuan, an increase of 32.5% over the same period last year, and its net profit was 7.44 million yuan, turning a loss into a profit, slightly exceeding our expectations, mainly due to the high growth of the company's revenue.
Income picks up and gross profit margin falls. In 2018, the company's vehicle / ground / information and safety inspection revenue was 618,383 million yuan, up 0.48% / down 5.36% / 62.86% over the same period last year. The significant increase in information and security inspection revenue was mainly due to the merger of the consolidated statements into subsidiaries SMA and Qihui Electronics. The company's overall gross profit margin was 31.4%, down 3.3ppt from the same period last year, mainly due to changes in the structure of delivered products and lower gross margins of SMA products than the company's original products.
During this period, the expense rate increases and the net profit margin reverses when the base is low. Due to the integration of SMA and Qihui Electronics, the company's sales / management + R & D expenses increased by 0.2max 1.5ppt in 2018; the tightening of the financing environment led to an increase in the company's financial expense rate 0.4ppt. In 2018, the company had a net operating cash inflow of 67 million yuan, basically the same as last year.
Trend of development
The expense rate is expected to decline. In 2018, due to the merger of SMA and Qihui Electronics, the company's expenses increased, and the overall financing environment was tight, resulting in an increase in financial expenses. Corporate expenses will be reduced in 2019, while the control of fees will be strengthened, and the relaxed superimposed financing environment is expected to bring about a reduction in financial costs. The 1Q19 expense rate has been greatly improved, and the sales / management R & D / financial expense rate of 1Q19 decreased respectively compared with the same period last year (0.1/6.3/0.7ppt).
Looking forward to new growth points. 1Q19's revenue grew by 32.5% year-on-year, exceeding expectations. We believe that it is mainly because the company's traditional vehicle and ground business has benefited from the high demeanor of the industry, and the rapid growth of new business information and security testing and door systems. In addition, 1Q19 signed a new order of 429 million yuan, an increase of 15.77% over the same period last year, and the business is making good progress.
Profit forecast
Due to the acceleration of 1Q19 revenue growth and the decline in expense rate, we have raised the profit forecast of 2019 Lexus 20e by 24% from RMB0.18 / RMB0.24 to RMB0.22 / RMB0.28.
Valuation and suggestion
The company's current share price corresponds to 19Compact 20e 34x/27x PUBG E. Due to the increase in profit forecast, we raised the company's target price by 28% from 5.50 yuan to 7.04 yuan, corresponding to 32x/25x 19/20eP/E, there is 5% potential downside, maintaining a neutral rating.
Risk
The progress of localization of subsidiary SMA is slower than expected.
