Core ideas:
The revenue of China News increased by 14.9% over the same period last year, and the performance increased by 10.20%. The company disclosed that in mid-2019, the company achieved revenue of 1.589 billion yuan (+ 14.92%, the same below) in the first half of the year, mainly due to the revenue growth of New Materials Company. the net profit is 134 million yuan (+ 10.20%). The difference between performance growth and revenue growth is mainly due to the decline in the gross profit margin of the company's business such as cold-rolled steel coil, which led to a decline of 18.9% of the company's overall gross profit margin by 1.3 percentage points compared with the same period last year. As of June 2019, the company had 1.385 billion yuan in cash on hand, an increase of 63.8% compared with the beginning of the period.
The gross profit margin of the thermal power business increased by 5 percentage points compared with the same period last year, and the contribution rate of gross profit reached 82.2%. The thermal power business is still the core driving force of the company's profit growth, with a total revenue of 962 million yuan (- 11.67%) and a gross profit of 248 million yuan (+ 11.74%) in the first half of the year. The contribution rate of gross profit further increased to 82.2%, benefiting from the decline in raw material costs and other factors. Gross profit margin of cogeneration increased by 25.7% compared with the same period last year. As of the company's installed power generation capacity 292.5MW, heating capacity of 2820 steam tons per hour.
Competitors shut down the integration of regional production capacity, the acquisition of Platinum Energy to expand the Fuyang Park competitor Samsung Thermal Power has stopped production, and the enterprises in the park originally responsible for heating will be heated by the company headquarters and Qingyuan Ecological heating. The company is expected to absorb the integration of regional production capacity. In addition, the company announced in August that it plans to buy 85% of the shares of Pului Energy with 850 million yuan in cash. Pareto Energy is currently working on seven cogeneration projects, of which the Taizhou Harbor project has been completed and put into production, with a heating capacity of 450t / h and an installed power generation capacity of 30MW. According to the EIA approval of the project, the thermoelectric capacity of the company will be close to 6000 tons per hour after the above project is completed and put into production. Platinum Rui Energy four projects are located in Jiangxi, the company is expected to go out of Jiangsu and Zhejiang with the help of acquisitions, and further expand the layout of cogeneration.
Regional integration plus capacity release led to a rebound in profits, maintaining the "buy" rating without considering the acquisition of Perri energy shares, we expect the company's EPS to be 0.37,0.47 and 0.56 yuan per share respectively from 2019 to 2021, and 17.6,13.9,11.5 times corresponding to the latest closing price, respectively. Out of prudence, we value 20 times PE in 2019, corresponding to a reasonable value of 7.31 yuan per share, the company has plenty of cash on hand, "local integration + remote expansion" continues to advance, and the layout of waste incineration power generation is involved in the field of solid waste tail disposal, large buybacks demonstrate management confidence and maintain the "buy" rating.
The risk indicates that the fluctuation of thermal demand leads to the fluctuation of profit margin; the progress of project expansion is lower than expected; the improvement of environmental standards leads to the increase of operating costs; and the impairment of assets is uncertain.
