Events:

The company released its third-quarter report in 2019. In the first three quarters of 2019, the company achieved operating income of 1.423 billion yuan, an increase of 29.01% over the same period last year, and a net profit of 94 million yuan, an increase of 83.22% over the same period last year.

Of this total, the operating income in the third quarter of 2019 was 515 million yuan, an increase of 18.22% over the same period last year, and the net profit was 32 million yuan, an increase of 27.49% over the same period last year. The company's three-quarter report predicts that the company's cumulative net profit from the beginning of the year to the end of the next reporting period will increase by 70% compared with the same period last year.

Operating income continued to grow and gross profit margin increased year-on-year

In recent years, the company adheres to the leadership of high-quality strategy and is committed to optimizing product structure, improving production management level and production efficiency, and ushering in rapid development. The growth rates of operating income from 2017 to 2018 were 63.72% and 72.29%, respectively. During the reporting period, the company's operating revenue increased by 29.01% in the first three quarters compared with the same period last year, of which the third quarter grew by 18.22%. In terms of profitability, the company's gross profit margin in the first three quarters of 2019 was 21.20%, up 2.51 percentage points from a year earlier. It is worth noting that the growth rate of the company's net profit in the first three quarters was much higher than that of revenue.

The R & D investment expenditure increased, and the expenditure rate remained stable during the period.

The company's R & D expenditure in the first three quarters of 2019 was 48 million yuan, an increase of 157.77% over the same period last year, mainly due to increased investment in new product development and R & D investment in offshore small nuclear reactor cables and wind farm transmission cables during the reporting period. During the first three quarters of 2019, the company's expense rate (excluding R & D expenses) was 10.81%, which was the same as that in the same period last year, in which the sales expense rate and management expense rate decreased, and the financial expenses increased by 122.62% compared with the same period last year. This is mainly due to the rapid growth of the main business and the increased demand for funds.

Focus on high value-added products, a number of businesses have improved

The company focuses on the area of high value-added products. Since the beginning of this year, the company has won the order for the first demonstration project of Hualong No. 1 in the world-Unit 5y6 of Fuqing Nuclear Power Station, the Shidao Bay nuclear power plant project, the first high temperature gas-cooled reactor demonstration project in the world, and the Xiapu demonstration fast reactor nuclear power project. This means that the company has become a technology-leading cable company in the nuclear power field. At the same time, relying on the company's nuclear power plant quality assurance and safety regulations and weapons and equipment quality management system, various businesses have been improved.

Investment advice and profit Forecast

It is estimated that the company's income from 2019 to 2021 will be 2.114 billion, 2.674 billion and 3.088 billion respectively, and the net profit will be 122 million, 163 million and 186 million respectively, and the PE corresponding to the current stock price will be 40, 30 and 26 times, giving the company an investment rating of "holding".

Risk hint

The macroeconomic downturn led to lower-than-expected cable sales, product competition incentives led to a downward gross profit margin, accounts receivable less than expected, and raw material prices fluctuated sharply in the short term.