Main points of investment

Event: Antong Holdings released its 2018 annual report and 2019 quarterly report. In 2018, the operating income was 10.06 billion yuan, up 48.8% from the same period last year; the net profit returned to the mother was 490 million yuan, down 11% from the same period last year, equivalent to 0.41 yuan in EPS; the net profit after deducting non-profit was 340 million yuan, down 31.2% from the same period last year, and the performance was lower than expected. In the first quarter of 2019, the operating income was 1.53 billion yuan, down 20.3% from the same period last year; the net profit was 20 million yuan, down 85.6% from the same period last year, equivalent to 0.02 yuan in EPS; and the loss after deducting non-profit was 20 million yuan, down 160 million yuan from the same period last year, and the performance was lower than expected.

Comments:

2018Q4 gross profit margin fell significantly, performance began to decline sharply. In the first three quarters of 2018, the company's operating income was 7.35 billion yuan, up 64.4% from the same period last year; the comprehensive gross profit margin was 12.9%, down 3.5 pct from the same period last year; and the net profit was 510 million yuan, up 39.9% from the same period last year. In the fourth quarter of 2019, the company's operating income was 2.71 billion yuan, an increase of 18.3% over the same period last year; the comprehensive gross profit margin was 8.3%, down 7.2 pct from the same period last year; and the net profit lost 20 million yuan, a sharp decrease of 210 million yuan over the same period last year. In the first quarter of 2019, the company's operating income was 1.53 billion yuan, down 20.3% from the same period last year; and the comprehensive gross profit margin was 8.2%, down 8.2pct from the same period last year. The company mentioned in its quarterly report that abnormal market conditions in the first quarter of 2019 led to a decline in corporate performance in the first quarter of 2019 due to macroeconomic cycles and fluctuations in the upstream industry economic cycle. this may cause the company's performance expectations to fall by more than 50% in the first half of 2019 compared with the same period a year earlier.

Losses on bad debts increased sharply in 2018. In 2018, the company set aside a loss of 78.23 million yuan in bad debts, a substantial increase of 67.53 million yuan over the same period last year. The amount of bills and accounts receivable of the company is relatively large, which is 1.59 billion yuan at the end of 2018, an increase of 680 million yuan over the same period last year, and 1.55 billion yuan at the end of March 2019, so we need to pay attention to the risk of bad debts.

The non-operating funds occupied by the controlling shareholders of the company occurred in 2018, which had been fully paid off by the date of issuance of the annual report.

In order to avoid the change of the actual control right of the listed company caused by the stock pledge of the controlling shareholder, and then affect the operational stability of the company, the non-operating capital occupation of the listed company by the controlling shareholder came into being in 2018. As of December 31, 2018, the total principal and interest of the occupied funds amounted to 1.13 billion yuan. As of the date of the annual report, Antong Holdings had received all occupied funds and interest, including the principal and interest of the occupied funds after the period of about 410 million yuan.

The company has a pending lawsuit. On April 11, 2019, the higher people's Court of Henan Province held a hearing on the business trust dispute between the plaintiff and the defendant Guo Dongze, Antong Holdings and a third party, Renjian International Trading (Shanghai) Co., Ltd., the total amount of external guarantee involved in Antong Holdings is 200 million yuan and the corresponding interest and liquidated damages, the relevant case has not yet been decided by the court. Without the examination and approval of the company's board of directors and shareholders' meeting, Guo Dongze, the actual controller, former chairman and legal representative of Antong Holdings, signed a "guarantee contract" with Antong Holdings in the name of Antong Holdings to provide joint and several guarantee for his personal debts. After a comprehensive judgment, Antong Holdings believes that the matter will not cause economic losses to the company, and the auditor believes that the matter is uncertain and the amount is large.

The approval for the company's non-public offering of shares shall expire. On November 9, 2018, the company received a "reply on approving the non-public offering of shares of Antong Holdings Co., Ltd." issued by the China Securities Regulatory Commission, and the non-public offering of no more than 297 million new shares by the approved company shall be valid for 6 months from the date of approval (October 29, 2018). The company failed to complete the non-public offering within 6 months from the date of approval by the China Securities Regulatory Commission, so the approval for the non-public offering expired. According to the relevant regulations, if the company launches the equity financing plan, it needs to reconvene the board of directors and shareholders' meeting to review the issuance plan, and report it to the CSRC for approval after disclosure in accordance with the regulations.

The company is expected to receive special financial support for the development of the logistics industry provided by Quanzhou state-owned enterprises. On April 26, 2019, Antong holding Co., Ltd. (hereinafter referred to as "Party A") and Quanzhou Financial holding Group Co., Ltd. (hereinafter referred to as "Party B")

, Quanzhou Transportation Development Group Co., Ltd. (hereinafter referred to as "Party C") and Quanzhou Fengze State-owned Investment Group Co., Ltd. (hereinafter referred to as "Ding Fang") signed the Cooperation Framework Agreement on jointly promoting the Development of Modern Logistics Industry. Party B, C and D are Quanzhou state-owned enterprises. It is proposed to carry out strategic cooperation with Party A (and / or Party A's subordinate companies) by setting up a special fund for the development of modern logistics industry with a scale of 2 billion yuan. Relying on Party A's logistics industry platform, the special funds will be invested in container logistics, supply chain management, logistics park construction, logistics information and port development and other fields to jointly promote the local logistics industry to become stronger and bigger. The first phase of the special fund, with a scale of 700 million yuan, will be put in place in the near future, and the follow-up cooperation will include, but not limited to, equity investment and working capital loans to the company's subsidiaries. As a framework agreement to guide the cooperation between the two sides, the specific cooperation issues involved need to be further communicated and implemented by both sides, and the relevant implementation details are still uncertain. The signing of the agreement does not involve changes in equity at the level of listed companies, nor will it lead to changes in corporate control. The follow-up company will implement the corresponding decision-making and examination and approval procedures for the specific implementation of the agreement in accordance with the relevant regulations, and fulfill the obligation of information disclosure in a timely manner.

Profit forecast and rating. The company's 2018Q4 performance began to show an obvious downward trend. We lowered the company's EPS forecast for 2019-2020 from 0.64,0.79 yuan to 0.13,0.15 yuan. It is estimated that the company's 2019-2021 EPS will be 0.13,0.15,0.16 yuan. On May 5, 2019, the company's stock price corresponds to the 2019-2021 PE of 59.5,52.4,47.7 times, downgrading the company's rating from "prudent overweight" to "neutral".

Risk hint. The deterioration of the supply and demand relationship of domestic trade collection and transportation, the lower-than-expected development of multimodal transport business, maritime safety accidents, the risk of equity pledge of the actual controller of the company, the risk of debt repayment and capital turnover of the company, the risk of bad debts of accounts receivable, etc.