Core ideas:
1. Event
The company released its annual report in 2019, with revenue of 33.283 billion yuan, an increase of 3.41% over the same period last year, and a net profit of 154 million yuan, an increase of 30.87% over the same period last year. The non-return net profit was 134 million yuan, an increase of 40.59% compared with the same period last year.
2. Our analysis and judgment
(1) the growth rate of performance is in line with expectations, and the improvement of profitability adds to the strength.
In 2019, the company's operating income and return net profit increased by 3.41% and 30.87% respectively compared with the same period last year, and the performance growth rate was basically in line with expectations. We believe that the main reason for the increase in revenue and profit is the improvement of the company's profitability, and the comprehensive gross profit margin of the product increased by 0.38PCT compared with the same period last year. In terms of products, the gross profit margin of power cable, communication cable and optical cable business increased by 1.98PCT and 11.15PCT respectively compared with the same period last year, while the revenue share of the latter also increased to 1.05% from 0.55% in 2018.
(2) the layout of the high-end cable market, the performance of sustained growth can be expected.
In recent years, the company is actively laying out rail cables, submarine cables, aerospace cables, 5G network cables and new energy vehicle cables and other areas, some areas have begun to gradually release their achievements. In the aviation cable market, the company has officially entered the catalogue of qualified suppliers of Comac ARJ21 aircraft, and has become the only domestic supplier of spiral harness and components. In terms of high-speed rail cable system, the company has completed the first domestic high-voltage cable project of China's high-speed rail EMU, which is expected to form a high-volume supply in 2020. In addition, the company has also completed the supply of China's first domestic high-voltage cable for alpine cars, which is expected to continue to contribute revenue in the future.
The company has recently issued 149 million shares and raised 500 million yuan, which is intended to be invested in a special polymer cable material project with an annual output of 200000 tons. We believe that with the gradual commissioning of the fund-raising project, the company will complete the production closed loop from the upstream conductor (Changzhou Jinyuan) to the polymer insulation material and then to the downstream users, the autonomous controllable ability will be greatly enhanced, and the prospect of aerospace business is considerable.
(3) the company is expected to benefit from the strength of the UHV industry.
UHV is one of the seven major areas of "new infrastructure", and the related capital expenditure is expected to increase significantly in 2020. UHV business is mainly undertaken by Baosheng High Voltage Cable Company, a brother enterprise in Baosheng Group, which is expected to benefit from the improvement of group asset securitization rate in the future as the group's only listing platform.
3. Investment advice
It is estimated that the return net profit of the company from 2020 to 2022 is 251 million, 304 million and 346 million respectively, and the EPS is 0.18,0.22 and 0.25yuan, respectively. The current stock price corresponds to 22x, 18x and 16x.
With reference to comparable companies in the industry, the company's valuation does not have obvious advantages, but considering the development potential of the company's products in aerospace, undersea communications and other areas, an appropriate valuation premium is given to maintain the "recommended" rating of the company.
Risk hint: the risk of the change of investment policy in power industry.