The net profit from January to September 2019 was 83.285 million yuan, an increase of 256% over the same period last year. The company announced its three-quarter results, with operating income of 313 million yuan in the first three quarters of 2019, an increase of 49.34% over the same period last year, and a net profit of 83.285 million yuan, an increase of 256.34% over the same period last year. In the third quarter alone, the operating income was 105 million yuan, an increase of 27.45% over the same period last year, and the net profit was 23.243 million yuan, an increase of 198.34% over the same period last year. In the first three quarters, the sales expense rate was 2.4%, down 0.59% from the same period last year, the management expense rate was 13.05%, down 9.84% from the same period last year, and the financial expense rate was 1.26%, up 0.24% from the same period last year. The gross profit margin in the first three quarters was 53.28%, up 3.76 percentage points from the same period last year.
With the recovery of traditional business and the volume of new business, the company expects its annual net profit to reach 1-130 million yuan. The company is the leading enterprise of new anti-wear and anti-corrosion materials for comprehensive industrial equipment in China, mainly providing comprehensive anti-wear and anti-corrosion protection schemes for industrial system equipment for electric power, iron and steel, cement and other enterprises. In 2019, the company's anti-wear and anti-corrosion business stabilized and rebounded, while in the context of the implementation of relevant national environmental protection policies, newly signed orders and project completion of waste incinerator protection, acoustic noise reduction projects and other related businesses maintained rapid growth. The company expects to make a net profit of 1-130 million yuan in 2019, an increase of 186.46% and 272.4% over the same period last year.
The demand of environmental protection and efficiency drives the protection business. The company cut into the garbage furnace protection business in 2017, and its customers are Kang Heng Environment, Everbright International, Green Power and other leading enterprises of waste incineration and power generation. The growth of garbage incinerator protection business is mainly based on: (1) due to the stricter environmental protection policy, waste incineration has become the main way of waste disposal in the future, and there is still room for growth in the construction of waste incinerators in the future. (2) the reduction of municipal solid waste incineration subsidy in the past two years has led operators to pay more attention to power generation efficiency. Therefore, more and more municipal solid waste incineration power plants purchase more types of medium-temperature sub-high pressure and sub-high temperature sub-high pressure operating furnaces, which leads to the aggravation of the corrosion problem of municipal solid waste incinerators. The market demand for municipal solid waste incinerator protection increases.
Industrial noise reduction business has achieved rapid growth. The company's noise reduction business is dominated by industrial noise reduction, and coordinated development of building acoustics and traffic noise reduction business. It is estimated that the whole market scale of noise pollution control is expected to reach 380-40 billion. The growth of acoustic noise reduction business is mainly based on: (1) the introduction of environmental tax law has promoted enterprises to carry out factory noise reduction projects; (2) the company has a certain customer base, the original customer groups such as electricity, cement, steel and other customer groups can have a synergistic effect on the development of the company's acoustic noise reduction business; (3) Evergrande Acoustics added "first-class qualification of environmental protection engineering professional contractor" in 2019, and the improvement of qualification makes the scope of bidding wider. At present, Evergrande Acoustics is growing rapidly in the field of industrial noise reduction.
Profit forecast. We estimate that the company's net profit from 2019 to 2021 will be 123 million yuan, 161 million yuan and 198 million yuan respectively, and the EPS will be 0.4,0.53 yuan and 0.64 yuan respectively. We give the company 22-28PE in 2019, with a reasonable value range of 8.8-11.2 yuan, which is better than that of the big city.
Risk hint. Orders fell short of expectations; downstream demand slowed.