Report guide

The company released its three-quarter report for 2019 on October 29th. In the first three quarters of 2019, the company achieved operating income of 1.907 billion yuan, down 14.17% from the same period last year, while the net profit returned to its mother was 64 million yuan, an increase of 3.2% over the same period last year.

Main points of investment

Steel structure business slows down, steel wheel business expansion improves profitability

In the first three quarters of 2019, the company achieved operating income of 1.907 billion yuan, down 14.17% from the same period last year, and its net profit was 64 million yuan, up 3.2% from the same period last year. Of this total, revenue in the third quarter was 640 million yuan, down 16.13% from the same period last year, and net profit was 21 million yuan, up 4.53% from the same period last year. The overall performance is slightly lower than expected, in which the decline in steel structure business is lower than expected, and the volume of steel wheel business is within the range of reasonable expectations. Specifically, in 2019, the company was affected by trade frictions and the domestic economic downturn. While Sino-US trade frictions in foreign markets and the United States imposed tariffs on China's steel and aluminum products, the company launched an anti-dumping investigation on Chinese steel structure products. Overseas orders have shrunk, the size and quantity of steel structure business orders have declined significantly, while the impact of domestic economic downward pressure, the company's steel structure business orders have generally declined. The steel wheel business continues to expand due to speeding up the market layout. In addition, with the increase in the proportion of steel wheel business with higher gross profit margin, the gross profit margin of the current period is 13.47%, which is higher than that of the whole of last year (1.44pcts). The net profit of the current period has increased to 3.31% from 2.76% in the fourth quarter of last year, and the profitability has improved.

Profit forecast and valuation

Due to the impact of the economic environment and trade frictions, the company's steel structure business orders have declined. We downgrade the company's profit forecast. It is expected that the company will achieve revenue of 28.21,24.03 and 3.981 billion yuan from 2019 to 2021, an increase of-2.77%, 20.59% and 16.99% over the same period last year. The net profit attributed to the parent company was 0.91,1.17 and 147 million yuan, up 11.45%, 28.10% and 26.06% respectively. The corresponding EPS is 0.13,0.17,0.21 yuan respectively, and the corresponding latest stock price PE is 27.75,21.66,17.18 times. The company is in the leading position of steel structure business in Fujian Province, and its products are sold both at home and abroad. Although the order volume of steel structure business has decreased due to trade friction and economic environment, the proportion of steel ring business has increased, and the gross profit margin has improved compared with the same period last year. We are still optimistic about the long-term development of the company and maintain its "buy" rating.

Risk hint: increased trade frictions