The company publishes its annual report for 2019 and quarterly report for 2020. In 2019, the company achieved operating income of 358.5 billion yuan (+ 19%), net profit of 2.734 billion yuan (+ 14%), and operating cash flow of 5.382 billion yuan (- 18%) for two consecutive years. 20Q1 realized operating income of 69.3 billion yuan (- 4%), net profit of 610 million yuan (- 33%) and operating cash flow of-8.894 billion yuan (19Q1 of-4.341 billion yuan).
In the past 19 years, the integrated two-wing strategy has made steady progress, and the development has continued to improve. In terms of "integration", the company has deeply implemented "Circulation 4.0", and the ability of supply chain integration services has been continuously improved. First, the integration effect has improved steadily, and the four main products, such as metals, energy, chemical industry, and automobiles, continue to remain in the forefront of dealers in the country; second, the transformation of the platform continues to accelerate, and the development of used car platform, rescue platform and Haining warp knitting integrated service platform is accelerated. Third, the volume of import and export trade continues to grow. In terms of the "two wings", the foundation for the development of financial services and high-end industries has been continuously consolidated. First, the financial sector business has developed steadily, and the overall performance has improved significantly compared with last year.
The company invested 10% of the shares in Huzhou Bank, and the social asset management scale of securities management, non-performing assets and equity investment increased by 1.317 billion yuan, an increase of 30% over the same period last year.
Second, the industrial sector to deepen quality improvement and efficiency, Deqing cable intelligent manufacturing base, Tongxiang 200000 tons / day sewage treatment and other major projects according to schedule.
The epidemic mainly affects cash flow and can be controlled as a whole. Although downstream demand shrank and commodity prices fluctuated sharply after the epidemic, the company's revenue and net profit fell less year-on-year (4% and 33%, respectively), reflecting the company's ability to hedge risks by means of futures and rooted in the real economy. The impact of the epidemic on the company is mainly in cash flow. There are two main reasons for the poor cash flow of the company's 20Q1 operation: (1) the epidemic inevitably lengthens the delivery cycle; (2) demand recovers after the epidemic, while the company itself is still rich in cash (monetary capital of 15 billion yuan + annual credit line of more than 100 billion yuan), so it increases the purchase volume and increases the prepayment by 7.09 billion yuan compared with the same period last year. We believe that the impact of the epidemic on the company as a whole can be controlled, and as the downstream gradually recovers to stimulate consumption policies (such as Zhejiang Province to boost car consumption policy), the company's profits and cash flow will improve.
Investment suggestion: due to the influence of the epidemic, we downgrade the company's annual return net profit forecast for 20-21-22 to RMB 30.52max, RMB 3.424 billion and EPS 0.51, to RMB 0.600.68, corresponding to the current price of PE 9.0, 7.7max, 6.8 times, still maintaining the "buy" rating.
Risk tips: the epidemic affects demand, large fluctuations in commodity prices, asset disposal and other non-economic fluctuations.