Event

The company released the third quarterly report of 2019 on October 21, 2019. In the third quarter, the company achieved revenue of 200 million yuan, an increase of 45% over the same period last year, a net profit of 51.36 million yuan, an increase of 53% over the same period last year, and a net profit of 48.57 million yuan, an increase of 63%.

Brief comment

Q3 performance slightly exceeded expectations, a substantial increase compared with the same period last year

The company had expected in the performance forecast Q3 net profit of 4686-53.55 million yuan, the results of the three quarters fell in the forecast range, but close to the upper limit, slightly exceeding expectations. The company's performance increased significantly compared with the same period last year, mainly due to: on the basis of the expansion of ① revenue, the gross profit increased to 41% from 39% in the same period last year, resulting in a 51% year-on-year increase in gross profit, an absolute increase of 27.88 million yuan; and an increase in ② income tax by 7.16 million yuan to 9.95 million yuan. Taken together, the above two items contributed 20.72 million yuan to the increase in net profit, which was close to the increase in net profit of 17.89 million yuan.

Q3 quarter-on-quarter compared with Q2 quarter, in the case of a 3% drop in revenue from the previous quarter, the net profit returned to the home increased by 46% compared with the previous quarter, with an absolute increase of 16.18 million yuan, mainly due to a total reduction of 11.82 million yuan in fees, taxes and additions during the ① period; ② credit impairment loss Q2 was-3.71 million yuan, Q3 was 3.78 million yuan, and net profit increased by 7.49 million yuan. The above two items contributed a total of 19.31 million yuan to the month-on-month increase in net profit, contributing the vast majority of the month-on-month increase.

The market boom will continue in the next two years, and the high performance growth will continue.

From the perspective of the prosperity of the wind power industry, according to the notice on actively promoting the work related to the unsubsidized parity of wind power and photovoltaic power generation, the wind power parity will be implemented after 2021, and the wind power rush for installation will be ushered in from 2019 to 2020. the industry boom has improved. At the same time, based on the continued pursuit of offshore wind power and new energy, overseas orders also continue to grow. According to the Vestas annual report, its on-hand orders 15.6GW in 2018 increased by 36% compared with the same period last year; on the other hand, from the company's own point of view, the impact of Siemens Gamesa integration disappeared completely in 2019, and the company's orders are expected to be substantially full and performance reversed.

Fund-raising projects continue to land, plus yachts and automotive composite materials

In order to solve the bottleneck of the company's production capacity, the fund-raising project has been put into production from 2018 to 2020. the annual production of 100, 000 auto parts projects has completed land expropriation, plant construction and the introduction of key equipment, and has achieved the output of 10 million sales revenue in 2018. The large-scale non-metallic mold and wind turbine cabin cover project has been landed in Yancheng, and the company now has a leasing plant of 12000 square meters. In 2018, it completed the production of two sets of wind turbine blade moulds and ten sets of offshore large-scale wind turbine cabin cover products, and later requisitioned more than 100mu of land in Yancheng. Four factories were built, on the one hand, it can meet the production of large-scale non-metallic moulds and engine room cover products for offshore wind power. On the one hand, make use of the transportation advantages of Dafeng Port to lay out the production capacity needs of overseas markets, and lay out the layout for the "two seas strategy".

The company introduces an excellent team with superior technology and experience in yacht market operation, and jointly registers Shandong Shuangyi Yacht Co., Ltd., Shuangyi Technology Holdings 70%. The Shuangyi yacht plans to introduce more than 30 sets of advanced production equipment, 43 patented technologies for boat design and production, 18 sets of boat production moulds and related supporting facilities, and 32 certification items for related products. Mainly sold to the United States, Canada, Australia, New Zealand and other markets.

After the completion of the project, it is estimated that the annual production scale of 2000 sets of yachts and accessories will be achieved. The company continues to increase the size of yachts and automotive composites to build a new driving force for growth. In addition, in the first half of the year, the Yancheng subsidiary of the company has obtained 64 mu of land certificate and started the construction of the plant, which is expected to be completed by the end of 2019; the No. 5 and No. 6 workshops of the company's Wucheng branch have also started construction in the first half of the year, with a construction area of more than 20,000 square meters, which is expected to be completed and put into use by the end of 2019. At that time, the company's capacity will be further expanded, which will effectively ease the pressure on production capacity.

We expect the company to achieve a net profit of 1.81 and 239 million from 2019 to 2020, corresponding to a PE of 15x and 12x, respectively, maintaining a buy rating.