1H2019 performance is in line with our expectations
Jiangsu Cathay Pacific announced 1H2019 results: revenue of 17.86 billion yuan, an increase of 7.44% over the same period last year, and net profit of 460 million yuan, an increase of 6.4% over the same period last year, corresponding to earnings per share of 0.29 yuan, which is in line with our expectations. 1H19 deducted 394 million yuan in non-net profit, an increase of 114% over the same period last year.
Thanks to revenue growth and a year-on-year increase in gross profit margin of 2.6 pct 1H19, the gross profit of 1H19 increased by 586 million yuan compared with the same period last year. Due to the higher investment income resulting from the disposal of equity in the same period last year, the investment income of the company decreased by 573 million yuan year-on-year. 2Q19's revenue was 9.57 billion yuan, an increase of 5.9%, 15.5%, and a net profit of 242 million yuan, and an increase of 18.1%, 10.6% compared with the previous month.
Trend of development
Revenue and profits from 1H19's trading business continued to grow. Based on the advantages of effective supply chain management and innovative business service model, 1H19's trading revenue and profits continue to grow. 1H19's trading revenue was 16.987 billion yuan, an increase of 5.6% over the same period last year, gross profit increased by 34.8% to 1.874 billion yuan, and gross profit margin increased by 2.39pct to 11.03%, of which export revenue was 12.657 billion yuan, an increase of 5.32%, and gross profit margin increased by 3.54pct to 13.15%. Revenue from the import business was 4.33 billion yuan, up 6.37 per cent from the same period last year, while gross profit margin fell 0.91pct to 4.85 per cent.
The volume and price of chemical business are rising, and the revenue is growing rapidly. According to the company's report, thanks to the increase in sales orders and rising sales prices, 1H19's chemical business revenue increased by 85.8% year-on-year to 829 million yuan, and gross profit margin increased by 2.87pct to 26.74% year-on-year. Among them, the revenue of Huarong Chemical, a subsidiary specializing in electrolyte and silane coupling agents, increased by 73% to 695 million yuan compared with the same period last year, while that of Chaowei New Materials, a subsidiary dedicated to electronic chemicals, increased by 38% to 64 million yuan.
We will continue to promote the business of new chemical materials and new energy. The company continues to steadily promote the 40, 000-ton electrolyte project in Poland, which is expected to be put into production in mid-2020, according to the report. As the development platform of the company's chemical new materials and new energy business, Ruitai New Energy, a wholly-owned subsidiary, will continue to accelerate the development of chemical new materials and new energy business in the future.
Profit forecast and valuation
Due to the growth of trade business and the good performance of gross profit margin, and optimistic about the growth of electrolyte, the profit forecast for 2019 was raised by 29% to 918 million yuan, and the profit forecast for 2020 was maintained at 1.076 billion yuan. The company's current share price corresponds to a 20-year price-to-earnings ratio of 9.5 to 8.1x in 2019. Maintain the target price of 8 yuan, corresponding to 44% of the rising space and the price-to-earnings ratio of 14max / 12x in 2019, and maintain an outperforming industry rating.
Risk
Revenue and profit margins of the trading business fell, while sales of the chemical business were lower than expected.