Performance review

The company's performance in 2019 fell short of our expectations.

The company's revenue in 2019 was 5.23 billion yuan, an increase of 9.1%, a net profit of 87 million yuan, a drop of 15.2%, and a deduction of 83 million yuan for non-net profit, a decrease of 1.9%. The company's asset impairment and credit impairment totaled 34 million yuan, compared with only 1 million in the same period last year. In addition, there was a loss of investment income of about 20 million yuan, double that of last year, making the performance lower than expected.

Trend of development

The charging business has grown well, the scale has expanded steadily, and the social service capacity has been expanded. In 2019, the company has put into operation 157 charging stations and 916 charging piles, of which 765 are public transport services within the group and 151 are social services, with a total increase of 50% and a fivefold increase in the number of social services. Benefiting from the growth of the group's bus fleet and the expansion of social services, the revenue of the charging business has increased by 39%, the charging capacity is about 250 million kilowatt-hours, and the comprehensive electricity service charge has reached 1 yuan per kilowatt-hour, which is higher than the market average, and the gross profit margin has remained stable. At present, the company has completed the third phase of the bus charging pile project, and promoted the fourth phase of the project, and further increased the scale of construction funds. We believe that the size of the company's charging piles will maintain steady growth, maintain the high profitability of domestic services and steadily expand the scale of external services.

The cash flow performance is outstanding, and the asset construction of charging stations promotes the increase of debt ratio. The company's operating cash flow reached 505 million yuan in 2019, five times the current net profit, up from three times in 2018. The cash flow of investment is relatively large, with a net expenditure of 280 million yuan, which is mainly due to the large total investment in the third and fourth phases of the charging pile project under construction. In addition, the company's total asset-liability ratio reached 62.3% and interest-bearing debt ratio reached 54.5%, both of which increased over the previous year, mainly due to the rapid growth of financial leasing liabilities under the expansion of charging station assets.

Dividends have fallen sharply, and traditional business growth and profitability have slowed. The company's dividend payout rate was only 37% in 2019, down from 78% in 2017 and 86% in 2018. The growth of the 4S store business slowed due to the weakness of the overall car market, but it was better than the market, and the gross profit margin of the car body media business fell 5.6ppt. We believe that traditional cars and bus travel will be greatly affected by the epidemic in 2020, and the short-term performance growth may slow down under the high capital expenditure of charging piles.

Profit forecast and valuation

Considering the impact of the epidemic on the industry, the profit forecast for 2020 is lowered by 38% to 104 million yuan, and the profit forecast for 2021 is introduced to 134 million yuan. Considering that the company's traditional business has a great impact on the performance, the high-growth charging business is currently mainly for the internal services of the public transport group. With the expansion of the scale, it can still maintain good growth and stabilize the valuation center, so the target price is reduced by 10% to 4.50 yuan, which is less than the adjustment of the profit forecast. The current share price and the target price correspond to 2020max 2021e 30xPmax E and 35Unix Pmax E respectively, with 14.5% upside space, maintaining an industry rating that outperforms.

Risk

The utilization rate of charging piles climbed less than expected, and car sales in 4S stores fell short of expectations.