occurrences
The company released its 2019 interim report. In mid-2019, it achieved operating income of 626 million yuan, an increase of 18.70% over the previous year; achieved gross profit of 141 million yuan, an increase of -7.21% over the previous year; and achieved net profit attributable to the parent company of 65 million yuan, an increase of -19.94% over the previous year.
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The company's comprehensive gross margin recovered in the second quarter of 2019, but the annual gross margin was still under pressure. In April-June 2019, the company achieved total revenue of 292 million yuan, an increase of 0.47% over the previous year; gross profit of 0.74 million yuan, an increase of -7.32% over the previous year. Compared with the -7.07% year-on-year increase in gross profit in the first quarter, the growth rate decreased by 0.25 percentage points; Guimu's net profit was 103 million yuan, an increase of 42.27% over the previous year. The company achieved a comprehensive gross profit margin of 22.51% in the medium term, and achieved a gross profit margin of 25.26% in the second quarter. Compared with the gross profit margin of 20.09% in the first quarter, it recovered 4.17 percentage points. The company achieved the expansion of tank production capacity in 2018, and the bottleneck in tank production capacity was broken through, but due to the worsening trade conflict situation, the growth rate of orders and the willingness of downstream customers to carry boxes was impacted. The slowdown in sales limited tank gross margin levels to remain low. As the share of tank revenue with relatively low gross margins expands, it continues to drag down the company's overall gross margin level.
Key equipment, materials and construction projects for intelligent cold storage equipment will begin in 2020. In mid-2018, the company established Nantong Sifang Energy Saving Technology Co., Ltd. and Nantong Sifang Refrigeration Engineering Co., Ltd. and Nantong Sifang Refrigeration Engineering Co., Ltd. and the corresponding investment was put in place in 2019, and business operations officially began. The scope of business is mainly R&D, manufacturing, sales, installation, maintenance and technical service of new energy-saving panels, insulating sheets, refrigeration equipment, compressors, air coolers, refrigeration warehouses and industrial doors; mechanical and electrical equipment installation works, anticorrosive insulation workers, refrigeration equipment installation works, construction of mechanical and electrical installation projects for buildings, cold storage installations, etc. Key equipment, materials, and installation and construction projects for intelligent cold storage will begin in 2020, driving the company's performance back to a relatively rapid growth trajectory.
Profit forecasting
According to the interim report, we adjusted our profit forecast. It is estimated that in 2019-2021, the company can achieve operating income of 1,488, 20.02 and 2,721 billion yuan, net profit attributable to the parent company of 172, 218 and 286 million yuan, and a total share capital of 211 million shares, corresponding to EPS 0.81, 1.03 and 1.36 yuan. On August 27, 2019, the stock price was 1,613 yuan, corresponding to a market value of 3.4 billion yuan. The PE in 2019-2021 was about 22, 18, and 13 times, and the latest PB was 2.01 times. The production capacity bottleneck in the company's tank business broke through in 2019. Although the trade conflict affected the pace of tank customer updates and pickups, the company's production orders were still quite full. The company's key equipment, materials and installation and construction projects for smart cold storage will begin in 2020, driving the company's performance back to a relatively rapid growth trajectory. We are optimistic about the company's new business layout. It is likely that 2020 will return to a growth trajectory. The company's operations are steady, the financial situation is excellent, and the company's “increase in holdings” rating will be maintained.
Risk warning: Construction progress is lower than expected, revenue growth is lower than expected, and gross margin recovery is lower than expected.
