Event: the company released the 2019 mid-term report. In the first half of 2019, the operating income was 810 million yuan, down 23.1% from the same period last year; the net profit attributed to shareholders of listed companies was 120 million yuan, down 15.1% from the same period last year.
Affected by the general environment and the company's strategic adjustment, revenue declined: the company achieved operating income of 810 million yuan in the first half of 2019, down 23.1% from the same period last year; the net profit returned to its mother was 120 million yuan, down 15.1% from the same period last year. While strictly controlling the scale of real estate gardens, the company actively developed ecological restoration business, realizing ecological restoration business income of 470 million yuan in the reporting period, accounting for 57.4%, an increase of 19.5% over the same period last year.
Profitability has increased significantly, and R & D costs have increased significantly: the company's gross profit margin in the first half of 2019 was 37.6%, up 8.7 percentage points from the same period last year; and net profit was 15.2%, up 1.4 percentage points from the same period last year. During the period, the expenditure rate was 15.7%, an increase of 5.9% over the same period last year, mainly due to the substantial increase in R & D expenses and interest expenses. The company's inventory is 1.45 billion yuan, down slightly from the beginning of the year.
Introduce state-owned assets to improve operating capacity: the company's controlling shareholder and deputy general manager transfer 9.68% of the shares of the company to Zhongying Fund, which becomes the second largest shareholder of the company. Zhongying Fund is the capital operation and foreign investment platform of Hunan Xiangjiang Group, and the State-owned assets Supervision and Administration Commission of Xiangjiang Group. Its main business covers area development, urban operation and so on. Its business is consistent with Meishang ecological restoration, ecological culture and tourism and ecological products. The company is also expected to take advantage of Xiangjiang Group to quickly cut into the Hunan market and the middle reaches of the Yangtze River, further improve the business layout of the Yangtze River Economic Belt, and form effective interaction in market resources, financial support and business coordination.
The company's ecological products will become a new profit point: the company is a leading domestic manufacturer in the field of organic coverage, and with the advantages of listed companies, it has quickly become a leading enterprise in the research, development, production, application and sales of domestic organic mulch products. The launch of wood organic mulch products are gradually opening up the market in recent years. With the improvement of urban greening rate, garden waste has become a pain point, and organic covering products can recycle urban garden waste, which solves the problem of garden waste treatment and meets the needs of ecological environmental protection, and will become the first choice for many cities in the future. with the stricter environmental protection policy and the popularization of garbage classification, organic coverage business is expected to meet explosive growth.
Profit forecast and rating. It is estimated that the EPS from 2019 to 2021 will be 0.6,0.67,0.76 yuan, corresponding to 21,19,17 times PE. Considering that the company's ecological business and ecological products will bring explosive growth after business transformation, the "buy" rating will be maintained.
Risk hints: the risk that the project progress and payback are lower than expected, the risk of goodwill impairment, and the risk that ecological business expansion is not as expected.