Event: the company released its annual report in 2019, with annual revenue of 2.636 billion yuan, down 9.16% from the same period last year, and net profit of 82.394 million yuan, up 0.96% from the same period last year.
The business of automobile steel wheel is increasing steadily against the trend, and the prospect of forging aluminum wheel is broad. In the context of the overall downward trend of the automotive industry, the company's automotive steel wheel business revenue reached 1.101 billion yuan in 2019, an increase of 2.38% over the same period last year. At the same time, the gross profit margin of the business was 16.01%, an increase of 3.61 percentage points over the same period last year, and the profitability improved significantly. Tubeless steel wheel is the main source of operating income and strong profitability, accounting for 30.56% of revenue and 18.67% of gross profit margin. With the development of automobile hub materials to lightweight, resource-saving and high performance, the market capacity of forged aluminum alloy wheels is expected to expand. The company has newly completed the R & D and testing of more than ten varieties of forged aluminum rings, and the development is expected in the future.
The revenue of steel structure business has declined due to external influence, and there is a great potential for countercyclical regulation of domestic demand. In 2019, due to the dual factors of Sino-US trade frictions and domestic economic downturn, the number and scale of overseas orders for steel structure of the company decreased more than that of the same period last year. The annual operating income of the steel structure business reached 1.338 billion yuan, down 17.08% from the same period last year. In particular, the United States imposed tariffs and anti-dumping investigations on Chinese steel and aluminum products, and overseas steel structure orders decreased significantly. At present, affected by the epidemic, the macro-economy is facing certain pressure, China is expected to start counter-cyclical regulation, steel structure benefits from the increase in infrastructure construction investment, the domestic steel structure business situation is expected to have great potential.
Deep ploughing steel products subdivide the field, the product chain is expected to be further improved. The company ploughs the domestic steel products market and insists on two-wheel drive of wheels and steel structure. The steel wheel industry has a certain entry threshold, with the continuous clearance of the manufacturers at the end of the industry, the market share is expected to be improved. For the steel structure business, the company has invested in metal curtain wall composite panels and steel grid panels based on the new Changcheng business through joint venture and holding cooperation. At present, the joint venture companies have undertaken a number of projects, the market recognition has gradually increased, and the synergy effect has emerged. In addition, the company continues to layout the automotive aftermarket strategy through joint ventures, and gradually realizes the transition from a single wheel rim supplier to a wheel management service provider through the combination of platform service management and hardware provision.
Investment suggestion: as the leading automobile steel wheel manufacturer in China, with the gradual recovery of the industry, the future performance is expected to continue to pick up. We estimate that the company's 20-year / 21-year revenue will be 2.543 billion yuan / 2.752 billion yuan respectively, and the return net profit will be 86 million yuan / 101 million yuan respectively, corresponding to 24 times of 21-year PE, maintaining the "buy" rating.
Risk hint: sales in the automobile industry are lower than expected, and steel structure demand is lower than expected.