Performance review
Maintain neutrality
1H19 performance is in line with our expectations
Dinghan Technology announced 1H19 results: the company achieved operating income of 700 million yuan, an increase of 18.1% over the same period last year; the net profit attributed to the parent company was 32 million yuan, an increase of 12.0% over the same period last year, corresponding to a profit of 0.06 yuan per share. In a single quarter, 2Q19's income and return net profit were 365,0.25 billion yuan respectively, with a year-on-year change of + 7.4%.
Business has grown steadily and gross margin has improved. The income of 1H19 vehicle / ground / informatization and safety inspection was RMB 362 million, an increase of 21.3%, 22.0% and 1.7% respectively over the same period last year, mainly due to the periodic warming of the urban and rail transit industries. The gross profit margin of the main products also increased in the first half of the year, with the gross profit margin of the vehicle / ground / information business increased by 3.6/0.6/8.3ppt to 25.4max 40.5max 43.0% respectively; overall, the company's comprehensive gross profit margin increased by 3.4ppt to 32.6% compared with the same period last year.
During the period, the expense rate improved significantly, and the net profit margin decreased slightly. In the first half of the year, the company's sales / management / R & D / financial expense rate changed year-on-year-3.0/-1.2/-1.3/-0.1ppt, during which the total expense rate decreased by 5.7ppt. However, 1H19's net profit margin fell slightly to 4.6 per cent year-on-year due to a high base for the same period due to the 59.82 million yuan increase in profits from bad debts in the first half of last year. The net cash outflow from 1H19's operating activities was 52 million yuan, which was basically the same as that of the same period last year.
Trend of development
The growth rate of new orders has slowed in the short term. The company signed 750 million yuan in new orders from January to June 2019, down 20.9% from the same period last year, failing to continue the growth rate of 1Q19. By the end of June, orders on hand were 2.16 billion yuan, down 4.4% from the same period last year. We believe that the decline in the growth rate of newly signed orders will lead to a further slowdown in the growth of the company's 2H19 performance.
The company's business layout is more comprehensive. In recent years, the company has implemented the strategic transformation of "ground to vehicle". At present, the business has formed three major business units: ground electrical equipment, vehicle electrical equipment, information and safety testing; looking forward, investors are advised to pay attention to the continuous expansion and breakthrough of the company's product line.
Profit forecast and valuation
Due to the slower-than-expected growth of newly signed orders in the first half of the year, we lowered the company's 20-year profit forecast for 2019 Universe by 16% Universe 10% to 0.18 Gap 0.25 yuan. The company's current share price corresponds to 2019 Universe, 2020, 340.25x Pmax E. The neutral rating is maintained, but taking into account the downward revision of the earnings forecast, we lower the company's target price by 16.5% to 5.88 yuan, corresponding to the 2019 prime, which is 24 times Pmax E, which is 5.9% lower than the current share price.
Risk.
The promotion of new products has brought about an increase in the rate of expenses during the period.