occurrences
The company released its report for the third quarter of 2019. It achieved operating income of 876 million yuan in the first three quarters of 2019, an increase of 1.99% over the previous year; achieved gross profit of 200 million yuan, a decrease of 12.66% over the previous year; and achieved net profit attributable to the parent company of 92 million yuan, a decrease of 35.78% over the previous year.
reviews
The year-on-year growth rate of revenue and net profit to the mother in the third quarter of 2019 accelerated, and the negative increase in net profit of the mother for the whole year was basically determined. From January to September 2019, the company achieved sales revenue of 876 million yuan, an increase of 1.99% over the previous year; achieved gross profit of 200 million yuan, a decrease of 12.66% over the previous year; and the comprehensive gross profit margin was 22.90%, an increase of 0.39 percentage points compared to mid-2019. The company's revenue and gross profit growth in the first three quarters fell short of our expectations.
Net profit attributable to the parent company was 92 million yuan, a year-on-year decrease of 35.78%. We estimate that it was mainly affected by the year-on-year decline in other earnings and profits. In July-September 2019, total operating income was 251 million yuan, a year-on-year decrease of 24.52%; gross profit of 60 million yuan, a decrease of 31.82% over the previous year; net profit attributable to the parent company was 26 million yuan, a decrease of 56.97% year-on-year; compared with the second quarter of 2019, the year-on-year growth rate of revenue, gross profit, and net profit attributable to the parent company accelerated.
The company's 2019 performance was mainly dragged down by tanks. Growth in 2020 mainly depended on the recovery of the year-on-year growth rate of tanks and the revenue contribution of key equipment, materials and engineering of intelligent cold storage equipment. The company's tank capacity bottleneck in 2019 was broken, but it was affected by the Sino-US trade conflict on the expectations of the global trade distribution industry. Customers placed fewer tank orders and delayed can pick-up times. The company's capacity utilization rate remains high, but sales and settlement have clearly declined sharply. In mid-2018, the company established Nantong Sifang Energy Saving Technology Co., Ltd. and Nantong Sifang Refrigeration Engineering Co., Ltd. and Nantong Sifang Refrigeration Engineering Co., Ltd. and officially started business operations in 2019. The scope of business is mainly the engineering construction of new energy-saving panels, insulating panels, soundproof panels, refrigeration equipment, compressors, air coolers, refrigeration warehouses and industrial doors, cold storage installation, etc. Key equipment, materials, and installation and construction projects for intelligent cold storage will begin in 2020, driving the company's performance back to a relatively rapid growth trajectory.
Profit forecasting
We adjusted our profit forecast. It is estimated that in 2019-2021, the company can achieve operating income of 1,179, 15.73, and 121 million yuan, net profit attributable to the parent company of 150, 188 and 243 million yuan, and a total share capital of 211 million shares, corresponding to EPS 0.71, 0.89 and 1.15 yuan. On October 29, 2019, the stock price was 1,450 yuan, corresponding to a market value of 2.9 billion yuan. The PE in 2019-2021 was about 20, 16, and 13 times, and the latest PB was 1.73 times. The production capacity bottleneck in the company's tank business broke through in 2019, but the pace of tank customer updates and delivery was affected by trade conflicts. The company's key equipment, materials and installation and construction projects for smart cold storage will begin in 2020, driving the company's performance back to a relatively rapid growth trajectory. We are optimistic about the company's new business layout. It is likely that 2020 will return to a growth trajectory. The company's operations are steady, the financial situation is excellent, and the company's “increase in holdings” rating will be maintained.
Risk warning: Construction progress is lower than expected, revenue growth is lower than expected, and gross margin recovery is lower than expected.