This report is read as follows:
Downstream investment continues to pick up, judging that the high boom will continue to 2021; the company's newly signed orders have rebounded year by year since 16 years, the order execution rate and payback have reached a historically high level, and the company's profitability will pick up steadily after clearing the report.
Main points of investment:
Conclusion: the downstream investment continues to pick up, the company's newly signed orders have rebounded year by year since 16 years, and the order execution rate and payback have reached a historically high level. Judging that the downstream boom is expected to continue to 2020-21, the EPS in 2019-21 is expected to be 0.022, 0.034, 0.038 yuan respectively, with reference to the industry average PB (19H1 average PB 2.6X), taking into account the profit level to give a certain discount, give 19H1 2.2 times PB, the target price 3.52 yuan, given the "cautious increase" rating.
Downstream investment boom is expected to continue until 2021, nuclear power restart to drive revenue, rebate for the better. The company's products are mainly used in chemical industry, metallurgy, nuclear power and other fields. After the last round of production capacity clearance, the operating conditions of enterprises above scale have been greatly improved, the demand for upgrading and upgrading of stock equipment has been superimposed, and the investment boom has continued to rise. Investment in 19H1 chemical industry, ferrous metal smelting and Calendering processing fixed assets increased by 9.3% and 42.3% respectively. Nuclear power restart approval, the current "13th five-year Plan" later will start 6-8 new units each year, the company's nuclear equipment bidding to speed up, revenue and payback is expected to improve.
The rate of new orders and order execution continued to pick up, and the payback reached the best level in history. Benefiting from a pick-up in downstream investment, new orders signed by the company have continued to grow since 2016, reaching 13 billion in 2018 (a record high of 16.5 billion in 10 years), and 19H1 accounts received in advance increased to 1.8 billion (a record high of 2.2 billion in 2009). The 18-year order execution rate reached 80.7%, which is at a historically high level. From the perspective of rebate, the company returned 11 billion yuan in 18 years, and the net cash flow of operation was 680 million, all of which were at a high level in history.
The report is light and looking forward to a rebound in profitability. In 2016, the company recorded an impairment loss of 2.96 billion, the net inventory value decreased from 6.5 billion to 3.7 billion, and the asset quality improved greatly. Under the background of the recovery of superimposed demand, the company's huge losses in 2015 and 16 years have been greatly improved. under the condition that the steel price remains high gross profit has been eroded, the net interest rate in 2017-18 is 0.8% and 1.2% respectively. Judging that the subsequent economies of scale and internal control work together, the company's profitability will pick up steadily.
Risk tips: increased competition in the industry, high prices of raw materials.