Main points of investment:
The main industry of the track has developed well, and the net profit has increased significantly: Longxin Science and Technology has been spun off from the listed company in October 2019. In addition to Longxin Technology, the company achieved revenue of 3.36 billion yuan this year, an increase of 18.2% over the same period last year, of which the revenue of the main business of the track was 2.68 billion yuan, an increase of 28% over the same period last year. By the end of the reporting period, the amount of orders-on-hand was 4 billion yuan, an increase of 8% over the same period last year, of which the revenue of door system business was 2.32 billion yuan, up 30.2% from the same period last year. New energy auto parts business was affected by the decline of industrial subsidy policy, achieving revenue of 340 million yuan, down 20% from the same period last year. The company's gross profit margin on sales was 34.6%, an increase of 5.1pct over the same period last year, of which the gross profit margin of the door system business was 39.1%, an increase of 3.2pct over the same period last year. The company achieved a net profit of 650 million yuan, an increase of 3.8 billion yuan over the same period last year, the reasons for the substantial increase: first, the company's main rail transit business maintained good and stable growth; second, the investment income from the sale of Longxin technology equity this year was 390 million yuan; third, the provision for large debts and bad debts in the same period last year was 1.07 billion yuan, as well as 2.27 billion yuan in goodwill impairment.
Rail transit market to maintain market leadership, speed up the market layout of new energy bus door systems at home and abroad:
The company obtained new projects in the traditional inferior areas of the urban rail market; the high-speed car market successfully entered 400km/h high-speed cars and 250km/h standard moving platform, and obtained a large share of batch orders for 160km/h centralized EMU; the newly built market for gate and fan module products obtained a new line order; urban rail connectors obtained the qualification of supplier of Tangshan Rolling Stock works and Changchun bus, and the stock order increased significantly compared with last year. On the basis of the continuous increase of the existing domestic market share, the new energy bus door system product (electric plug door) independently developed by the company has further accelerated the domestic bus market layout and the development of new overseas markets. In 2019, the company's overseas revenue increased by 38.3% compared with the same period last year, and the gross profit margin increased by 17.6pct over the same period last year. The company successfully obtained domestic sales orders in many regions and export orders from the public transport markets of Bulgaria, South Korea and other countries.
Rail transit has upward bearing and strong core competitiveness: rail transit, as an important national infrastructure, is an important investment direction of new infrastructure at present. Local governments at all levels regard rail transit construction as an important measure to stabilize growth, and urban comprehensive transportation system as an important part of promoting a new type of urbanization. It is expected that the urban rail market demand will continue to grow, and the EMU market demand will remain stable. Relying on the advantages of the national technology center, the company has established a perfect technological innovation system, has a number of core original technologies in the rail vehicle door system, and has a strong core competitiveness of rail transit business.
Give a rating of "overweight". It is estimated that the company's operating income from 2020 to 2022 will be 4.13 billion yuan, 5.01 billion yuan and 5.99 billion yuan respectively, and the net profit returned to its mother will be 441 million yuan, 580 million yuan and 770 million yuan respectively. Corresponding to the previous stock price, the dynamic PE will be 16, 12 and 9 times respectively. Considering the good development prospects of the rail transit industry and Longxin Technology has spun off the listed company, covering for the first time to give "overweight" rating.
Risk hints: the risk of macroeconomic and policy change; the lower-than-expected risk of urban rail construction; the risk of declining profitability caused by intensified industry competition; the risk of decentralized ownership and the risk of change of control.