Report guide

In the first half of 2019, the company achieved operating income of 1.268 billion yuan, down 13.15% from the same period last year, while the net profit belonging to shareholders of listed companies was 43 million yuan, up 2.57% from the same period last year.

Main points of investment

Revenue of steel structure business at home and abroad has declined, while steel ring business has increased steadily.

In the first half of 2019, the company achieved operating income of 1.268 billion yuan, down 13.15% from the same period last year, and the business growth rate was lower than expected, mainly affected by Sino-US trade frictions and domestic economic downturn. The volume and scale of the company's steel structure orders declined a lot compared with the same period last year, especially Sino-US trade frictions. The United States not only imposed tariffs on Chinese steel and aluminum products. In addition, it has also initiated an anti-dumping investigation into steel structure products exported from China to the United States, which directly or indirectly led to the postponement or suspension of engineering projects in many countries, so the company's acceptance of overseas steel structure orders decreased significantly in the first half of the year. at the same time, competition in the domestic market intensified, so steel structure business orders and scale declined greatly in the first half of 2019. The rapid growth of high-strength lightweight steel rings led to a steady increase in steel wheel business, with a business income of 573 million yuan in the first half of the year, an increase of 16.52% over the same period last year. In the first half of 2019, the net profit belonging to shareholders of listed companies was 43 million yuan, up 2.57% from the same period last year, and the gross profit margin on sales was 13.83%. Compared with the same period last year, 1.46pcts rose, steel prices of major raw materials at the cost side declined, and raw material costs fell in line with expectations. Profitability is expected to remain stable as raw material prices stabilize in the future.

The external environment affects the development of steel structure business; the steel ring business is increasing steadily and is optimistic about the high-end volume.

(1) the trade war friction affects the steel structure order, and the competition in the domestic market intensifies. In the first half of the year, the revenue of the company's steel structure business reached 598 million yuan, a decrease of 31.18% compared with the same period last year. Overseas markets, Sino-US trade war frictions, the United States imposed tariffs on China's steel and aluminum products while initiating an anti-dumping investigation on Chinese steel structure products, the company's business was deeply affected, and overseas orders decreased significantly. In the future, it is expected that overseas may continue to be affected. In the domestic market, the company insists on developing the steel structure business of medium and high-end products, and will continue to consolidate its good cooperative relations with domestic and foreign large-scale EPC such as Fluor in the United States, de Hinib in France, JGC in Japan, Zhongding in Taiwan, China Petroleum & Chemical Corp Construction, Petrochina Company Limited Project, China Power Investment far, China Construction, China Railway and so on. (2) the steel ring business is increasing steadily, and is optimistic about the "high quality-lightweight" application scene. Based on the full range of lightweight wheel products of high-strength steel, the company has achieved certain results through the layout of domestic and foreign production bases, improving the industrial chain and increasing the development of domestic and foreign markets. In the first half of this year, the company's operating income of steel wheels reached 573 million yuan, an increase of 16.52% over the same period last year. At the same time, the company has made in-depth innovation in the research and development, product design and manufacture of new high-strength steel materials.

Benefiting from the lightweight advantage of the industry, the prospect of lightweight products of high-strength steel is promising.

The market prospect of forged aluminum alloy hub is broad, and the company's forged aluminum ring business achievements are beginning to show.

Benefiting from the increasingly stringent automobile emission standards and the increasingly prominent demand for energy saving and environmental protection in the domestic industry, the application of "lightweight", "low carbon" and "new materials" of automobiles in the future will become an inevitable trend. forged aluminum alloy wheels have successfully become an important part of these requirements. In the first half of the year, the company completed the R & D and testing of more than a dozen varieties of forged aluminum rings, obtained the test certification of many authoritative organizations at home and abroad, and realized small batch production according to customer feedback. The company's lightweight forged aluminum alloy can only manufacture projects. The application for non-public offering shares has been approved by the CSRC. The first phase of the company will focus on product development and testing. The approval of non-public projects will contribute to the upgrading and transformation of the company's wheel product structure in the future.

Profit forecast and valuation

We expect the company to achieve revenue of 30.38,37.63 and 5.061 billion yuan from 2019 to 2021, an increase of 4.67%, 23.87% and 34.50% over the same period last year, and the net profit attributed to the parent company is 1.024, 1.346 and 198.1 million yuan, up 25.46%, 31.46% and 47.17% over the same period last year. From 2019 to 2021, the EPS is 0.15,0.19,0.28 yuan respectively, and the PE corresponding to the latest stock price is 25.06,19.06,12.95 times. The company is in the leading position of steel structure business in Fujian Province. although it is affected by trade friction and domestic economic downturn, the company has taken adequate measures, and its steel ring wheel business has increased steadily in an unfavorable environment. Its high-strength-lightweight products have increased significantly. Be optimistic about the development of the company and maintain its "buy" rating.