Event: the company disclosed in its three quarterly reports in 2019 that its operating income for the current period was 276 million yuan, down 76.58% from the same period last year, and its net profit for the current period was 118 million yuan, down 29.96% from the same period last year. In the first three quarters of 2019, the company achieved operating income of 2.099 billion yuan, down 60.57% from the same period last year, and realized a net profit of 492 million yuan belonging to shareholders of listed companies, a decrease of 43.84% over the same period last year. The company's short-term results have been delayed due to the postponement of settlement projects. We expect future results to continue to improve as the fourth quarter and the first half of next year enter the project harvest period. In the third quarter of 2019, net profit decreased significantly, gross profit margin decreased, net profit margin increased. In the first three quarters of 2019, the company achieved operating income of 2.099 billion yuan, down 60.57% from the same period last year, and realized a net profit of 492 million yuan belonging to shareholders of listed companies, a decrease of 43.84% over the same period last year. The company's gross profit margin fell 4.45 pct year-on-year to 22.39%, while net profit margin rose 6.54 pct to 25.00%. Financial and management fees have increased significantly, and the rate of sales expenses has remained stable. In the first three quarters of 2019, the company's financial expense rate and management expense rate increased by 1.3 pct and 1.7 pct respectively compared with the same period last year, reaching 0.9% and 2.7% respectively, while the sales expense rate remained stable at 0.7%.
The integration of the Yangtze River Delta is accelerated, and the Bay Valley Science and Technology Park is building a blockchain base. Since the second half of the year, there has been frequent good news about the integration of the Yangtze River Delta: in July, three provinces and one city issued an implementation plan to promote the establishment of a "Ninth 1" planning system.
In September, Chen Yin, member of the standing Committee of the Shanghai Municipal CPC Committee, said that he would focus on land management, project management, factor mobility, fiscal and tax sharing, public service policy, and public credit, and take the lead in exploring institutional innovation for integrated development in the demonstration zone to form a common code of conduct. On October 24, the "Integrated demonstration Zone" Jiashan County, Qingpu District and Wujiang District signed three strategic cooperation agreements. On October 29, the State Council issued the "reply on the overall Plan of the Yangtze River Delta Ecological Green Integrated Development demonstration Zone". In the reply, the State Council agreed to the implementation of the "plan" and stressed the need to ensure that the goals were achieved as scheduled. On November 1, the demonstration zone of ecological green integrated development in the Yangtze River Delta was unveiled. By the end of 2018, the company has 450,000 square meters of land storage in the demonstration area, accounting for 8.49% of the total land storage of 530.3 square meters. In the short term, the company is expected to benefit from the appreciation of land value. In the medium to long term, the company is expected to deeply participate in integrated infrastructure and other market-oriented projects by virtue of the advantages of the group, and continue to benefit. In addition, the company continues to increase venture capital investment through Chengding Fund, and the Bay Valley Science and Technology Park has become the listing place of Shanghai Block chain Association, which will cooperate with the construction of Shanghai Urban Block chain Industry guidance Fund Service Science and Innovation Center in the future.
Short-term debt remained stable and debt service pressure was good. At the end of the reporting period, the sum of the company's short-term borrowing and non-current liabilities due within one year was still around 2.4 billion yuan, a growth rate of only 0.15%, the same level as in the same period last year. At the end of the reporting period, the company's asset-liability ratio was 48.04%, and the withholding asset-liability ratio was 43.90%, changing by 2.51 and 4.48 pct respectively compared with the beginning of the year. At the end of the reporting period, the monetary funds held were 3.95 billion yuan, an increase of 14.88% over the same period last year, and the multiple of cash covering short-term debt reached 1.65.
Investment advice:
As a state-owned holding enterprise, the company actively participates in the process of state-owned assets reform and promoting the integration of the Yangtze River Delta, and is likely to benefit from the policy dividend for a long time. At the same time, due to the postponement of the company's important projects, it is expected to enter the project harvest period in the fourth quarter and the first half of next year, and future performance is expected to continue to improve. The company's venture capital platform and Bay Valley Science and Technology Park continue to be distributed in science and technology and other fields. We expect the company's EPS to be 0.61,0.89 and 1.25 yuan per share respectively from 2019 to 2021, and the corresponding PE is 9.39X and 6.44X respectively 4.61X, maintaining the "buy" rating.
Risk hint: the integration policy of the Yangtze River Delta is not as expected, and the project revenue is not as expected.