Brief comment on performance
2019 revenue of 5.049 billion yuan, year-on-year + 5.02%; net profit of 275 million yuan, + 44.23%; net profit of 216 million yuan, + 63.95%, exceeding expectations; dividend per share of 0.30 yuan, dividend yield of 5.0%. 2020Q1's revenue was 719 million yuan,-31.41% compared with the same period last year; the net profit returned to the mother was 43 million yuan, + 1.07% compared with the same period last year; and the non-return net profit was 38 million yuan, + 92.13% compared with the same period last year.
Business analysis
Profitability continues to improve, gross margin, net interest rate level hit a new high. The company adheres to the differentiation and boutique strategy of the middle and high-end pipe market. In 2019, pipeline sales were 956400 tons, + 4.59% compared with the same period last year. Among the main pipeline categories, the income growth rates of galvanized steel pipe, steel-plastic composite pipe, spirally welded pipe and straight seam submerged arc welded pipe were-0.8% 25.5% / 22.0%, 38.5%, 11.2%, 25.6%, 17.6% and 16.4%, respectively. Year-on-year + 1.6 / + 0.5/+2.0/-1.8pct, due to the decline in the cost of raw materials, the revenue of galvanized steel pipe decreased, but the gross profit level increased significantly. At the same time, the proportion of high-margin steel-plastic composite pipe, spirally welded pipe, straight seam submerged arc welded pipe and other high-end energy transmission pipe increased, driving the overall gross profit margin from + 2.1pct to 15.1%, and the net profit rate from + 1.5pct to 5.8%, all reaching the highest level in history. It is the main driver of performance growth in 2019.
Affected by the epidemic, sales and income of 2020Q1 fell sharply, but its profitability continued to improve, with gross profit margin and net profit margin respectively increasing by 1.1/2.1pct to 14.1% and 6.7% respectively.
Q1 expense rate and rebate are good, with a pre-increase of 2.3-2.8 times in the semi-annual report. 2019, 2020Q1 sales + management + financial expense rate is 6.0%, 5.7%, year-on-year + 0.8/-1.7pct. The company's asset structure has been continuously optimized, the asset-liability ratio of Q1 has dropped to 28%, and the proportion of financial expenses has decreased for eight consecutive quarters. In the first quarter, the payment of receivables was good, and the credit impairment loss increased by 15 million yuan, which was the main reason for the growth of Q1 performance. The company expects 2020H1's homing net profit to grow by 230% muri 280% year-on-year, mainly because the assets collected by Huzhou Jinzhou Oil and Gas Pipeline Company will generate 220 million net income from disposal in Q2.
Enjoy the dividend of accelerated construction of oil and gas pipelines, pipe demand is expected to continue to release. The National Pipe Network Company is speeding up its restructuring, and 21 companies under "three barrels of Oil" have become the first batch of assets to be included. After its formal operation, it will speed up the oil and gas pipeline construction plan. We expect that by 2025, the investment in natural gas pipelines will be close to 500 billion yuan. As one of the most complete oil and gas pipeline manufacturers in China, the company will fully benefit from the pipe demand brought about by the accelerated construction of oil and gas pipelines.
Investment suggestion
Taking into account the recognition of asset disposal income of 220 million over the past 20 years and the lag of large-scale pipeline construction after the establishment of the National Pipe Network Company, we expect the company to maintain its "buy" rating in 2020-2022 with EPS 0.92,0.68 (down 25 per cent) and 0.83 yuan, corresponding to a multiple of PE in 7-9-7.
Risk hint
After the epidemic, the process of resuming production was slow, the speed of pipeline construction was not up to expectations, and the gross profit margin of low-price competition in the industry decreased.