2019 performance is in line with market expectations
Connie announced its 2019 results: the company's operating income in 2019 was 3.398 billion yuan, which was basically the same as the same period last year; the net profit belonging to the parent company was 650 million yuan, turning losses into profits over the same period last year, and the net profit after deducting non-profit was 259 million yuan. The company's performance is in line with the previous forecast.
Longxin science and technology divestiture has been completed, and the main business of rail transportation has grown rapidly. Connie Mechatronics formally completed the divestiture of Longxin Technology in October 2019 and brought a disposal income of 386 million yuan. In 2019, the company's largest main business rail transit sector achieved revenue of 2.677 billion yuan, an increase of 28.0% over the same period last year, and the gross profit margin increased by 2ppt to 39.1% compared with the same period last year, which was better than market expectations. In addition, the company's new energy business revenue decreased by 20.1% to 336 million yuan in 2019 compared with the same period last year.
Profitability has gradually recovered, and operating cash flow has improved significantly. After Longxin Technology was no longer merged in 2019, Connie's comprehensive gross profit margin was 34.6%, close to returning to the historical average and 5.1ppt higher than in 2018. In 2019, the company's overall period expense rate was 22.6%, which is basically the same as the 2017 level. Due to the accelerated payback from major customers, the company's operating activities had a net cash inflow of 410 million yuan in 2019, an increase of 740 million yuan over the same period last year.
Trend of development
The company will refocus on rail communications and new energy businesses. As the goodwill generated by the acquisition of Longxin Technology was fully impaired in 2018 and all its equity was transferred in 2019, we believe that Longxin Technology will no longer have a negative impact on the company's operations. After the completion of the equity disposal of Longxin Technology, we believe that the company is expected to travel light and will refocus on rail communications and new energy business.
Rail delivery business may achieve steady growth in 2020. Thanks to the excellent product competitiveness, the market share of the company's rail crossing system has increased steadily in 2019, and its leading position has been further consolidated.
By the end of 2019, the company's door system orders reached 4 billion yuan, an increase of 8.0% over 2018. We judge that the procurement of national railway equipment will reach 100 billion yuan in 2020, which is basically the same as the same period last year, while the purchase of urban rail vehicles is expected to reach 40 billion yuan, an increase of about 20% over the same period last year. The company will directly benefit from the high prosperity of the industry.
Profit forecast and valuation
We raised the company's 2020 profit forecast by 20% to 440 million yuan, and introduced a net profit forecast of 520 million yuan in 2021, corresponding to a 17% year-on-year increase. The company's current share price corresponds to 14.8 pound 12.7 times 2020 pound 2021e Phand E. Taking into account the return of the company to the main business and the expected increase in the valuation of the "new infrastructure" investment, we raised the company's target price by 43% to 7.80 yuan based on the 15x target of 2020Universe 21e, which is 18% higher than the current stock price, maintaining a neutral rating.
Risk.
The development of new energy vehicle business is not as expected.