Event: the company issued a 2019 performance forecast, which is expected to achieve a net profit of about 400 million yuan (+ 198%) belonging to shareholders of listed companies, of which the net profit of shareholders of listed companies after deducting non-recurring profits and losses is about 370 million yuan (+ 600%).
High performance growth, fair value changes and asset impairment affect the profits of the current period. According to the National Bureau of Statistics, the national output of escalators and lifts in the first 11 months of 2019 was 1.065 million, an increase of 14.9 percent over the same period last year. Benefiting from the recovery of the industry, the company's investment income in the associated company Hitachi Elevator increased by about 100 million yuan in 2019 compared with the same period last year, and the company also achieved double-digit revenue growth in the first three quarters of 2019. According to the performance forecast, the company's 2019Q4 net profit and deduction of non-net profit are respectively about 39 million yuan and 35 million yuan, lower than market expectations, mainly due to the company in 2019 in accordance with the new financial instruments standards, fair value changes and various assets impairment provision is expected to reduce the current profit of about 80 million yuan.
The asset quality is high, and the long-term valuation is expected to improve. Hitachi Elevator, which is owned by the company, is the leader of domestic elevators and contributes to the company's main source of profits. It is expected to produce more than 100000 units in 2019. The company's own brand elevator business scale is leading in China and has been developing well for a long time. In November 2019, the company, Guangzhou Guangri Elevator Industry Co., Ltd., and Hitachi Elevator (China) Co., Ltd., a wholly-owned subsidiary, formed a consortium to win the public tender of Guangzhou Metro Group Co., Ltd. the procurement (package installation) and operation and maintenance service project of escalators and elevators for new lines of Guangzhou rail transit, with a winning bid amount of 5.5 billion yuan, is scheduled to be completed in 2023. The company's business income will be gradually recognized according to the project implementation progress, which will help to ensure the company's follow-up performance. By the end of the third quarter of 2019, the company's monetary capital and financial management amount exceeded 2.5 billion yuan, long-term and short-term loans totaled less than 100 million yuan, and the cash flow of elevator business was also good. The current company's PB is less than 0.9 times, which is expected to be repaired in the long term.
Profit forecast and investment advice. It is estimated that the company's homing net profit from 2019 to 2021 will be 4 / 4.5 million yuan, corresponding to EPS 0.47 billion yuan, 0.52 billion yuan, and PE valuation times 16-14-13, maintaining the "hold" rating.
Risk tips: elevator demand or lower-than-expected risk, profitability or lower-than-expected risk, investment return or lower-than-expected risk.