This report is read as follows:
The company's performance in the first half of 2019 is in line with expectations, and with the release of the company's production capacity, the company's performance will improve steadily. The company's solar power projects gradually began to generate electricity, the company's production costs fell, and the gross profit margin increased.
Main points of investment:
Maintain the "overweight" rating. The company achieved operating income of 1.324 billion yuan in the first half of 2019, up 14.14% from a year earlier, with revenue of 718 million from the same period last year, up 18.64% from a month earlier. The company's net profit in the first half of the year was 121 million yuan, up 19.56% from the same period last year. 2019Q2 net profit was 79 million, up 84.64% from the previous month, and the company's performance was in line with expectations. Maintain the company's forecast of $0.87, $1.00, EPS of $1.09 in 2021, maintain the company's target price of $14.83, and maintain the "overweight" rating.
The gross profit margin has risen steadily and the main business has developed steadily. The company's 2019Q2 gross profit margin was 16.47%, up 2.85% from the first quarter. The company's production cost was well controlled, and the gross profit margin rose steadily. The company's main business has developed steadily, with a bead wire output of 134400 tons in the first half of 2019, an increase of 14.48% over the same period last year, maintaining an upward trend. The company's IPO fund-raising capacity is basically on the ground, and we expect that with the increase in capacity utilization, the company's production will further increase.
Financial costs increased slightly and remained stable during the period. After the company successfully issued convertible bonds in May, the 2019Q2 financial expense rate rose 0.94 percent month-on-month to 1.50 percent. The company's expenditure rate (including R & D expenses) in the first half of 2019 was 6.99%, a slight increase of 0.14 percentage points over 2018, and remained stable as a whole.
The industry pattern is good, and the company's competitive advantage has improved steadily. The company is the leader of China's bead wire industry and participates in the formulation of industry standards. The domestic market share of bead wire products is maintained at about 30%. It is the largest bead wire manufacturer in China and has a solid position in the industry. With the gradual release of the company's production capacity, the company's competitive advantage will improve steadily. The company's photovoltaic power generation project connected to the grid will also bring about a reduction in the company's production costs.
Risk hint: the company's capacity release is not as expected and tire production has fallen sharply.