Investment suggestion
We downgraded our rating and target price on October 30 because of concerns about funding costs and liquidity. Specifically, in the context of national financial deleveraging, Yatong's financial expenses grew rapidly, and consumption growth was weak in the third or fourth quarter, while the company shrank its business size, resulting in 3Q18 performance falling short of expectations.
Since the fourth quarter, the financing environment of the company has been greatly improved, and since November 23, United Ratings has raised the outlook of Aitong's main rating from "stable" to "positive". We have raised our 2018 Universe profit forecast for 19 years by 28% to 3.9 gambit, maintaining a neutral rating for the time being, and we will continue to monitor the follow-up progress.
Reason
The transfer of equity to Shenzhen Investment Control may reduce financing costs: Yatong Holdings transferred its controlling stake to Shenzhen Investment Control on September 9, holding 18.3% of the total share capital and 17.85% of the total share capital after delivery. It is expected that the company's financing channels will continue to improve in 2019, and the cost of capital may fall.
The liquidity problem began to ease, and the financing environment improved: 1) Yiyatong Holdings and Zhou Guohui provided liquidity support to the company and strengthened their short-term solvency (a maximum loan of 1 billion yuan, no more than one year, the interest rate was no more than 8%); 2) signed a 3 billion yuan debt-to-equity cooperation framework agreement with ICBC Investment, and the company became Industrial and Commercial Bank of China's "head office debt-to-equity cooperation client". If the agreement can be successfully landed, it is expected to effectively reduce the company's financing pressure and reduce financial costs. 3) jointly launch a 5 billion yuan supply chain industry investment fund with Shenzhen Investment Control and Kunpeng Investment.
The change in management has no significant impact on the company's operation for the time being: after the completion of the delivery of shares controlled by Shenzhen Investment, some deep investment controllers have joined the board of directors, but we believe that the management of the company remains stable. this personnel change has no significant impact on the company's daily business activities for the time being.
Profit forecast and valuation
The company's annual performance guidance for 2018 is 179476 million yuan, corresponding to a 20% growth rate of-70%.
We raised our earnings forecast for 2018 Universe by 28% to RMB 390 million, with a corresponding growth rate of-34.5% and 69.7%, maintaining the target price of 5.5 yuan (corresponding to the price-to-earnings ratio of 17.2 x 2019 and 3% upward space). The current share price is currently trading at a price-to-earnings ratio of 29.1 times earnings in 2018, which remains neutral for the time being.
Risk.
Increased trade friction between China and the United States; equity pledge risk; macroeconomic downturn; rising expense rate.