Performance summary: the company released the quarterly report for 2020, with revenue of 3.07 billion yuan (- 28.1%), net profit of 9519 yuan (- 59.4%) and non-net profit of 88.78 million yuan (- 59.5%). The performance is in line with expectations.
The epidemic affected downstream construction, demand declined, and the company's short-term performance declined. Affected by the epidemic, the start of downstream real estate has been delayed, and the elevator industry has been negatively affected. According to the National Bureau of Statistics, 2020Q1 elevator, escalator and elevator production of 149000 units (- 20.7%), a sharp decline. Due to the negative impact of the industry, the company's 2020Q1 revenue fell 28.1%. Affected by the sharp decline in revenue, the company's 2020Q1 gross profit margin fell to 14.7% (- 2.4pp). The company's expense rate during the 2020Q1 period is 8.8% (+ 0.6pp), of which the sales expense rate is 3.6% (+ 0.3pp), the management expense rate is 6.9% (+ 0.9pp, of which the R & D expense rate is 2.9%, and the 0.4pp is increased), and the financial expense rate is-1.6% (- 0.6pp). The company's Q1 gross profit margin fell and the expense rate increased during the period, resulting in a much lower growth rate of net profit than revenue growth.
The renovation of old ladders and the demand for the installation of old houses are improving, which is worth paying attention to. In terms of the transformation of old ladders, there are nearly 7 million domestic ladders in use at the end of 2019, of which the number of old elevators which have been in operation for more than 15 years is increasing year by year, and the demand for the renovation of old ladders is being released year by year. Shanghai Mitsubishi Elevator, a subsidiary, has actively participated in the renovation of old elevators such as Shenzhen residential areas. so far, nearly 700 old elevators have been updated for Shenzhen residential areas, with an increase of more than 50% year-on-year in 2019. In terms of retrofitting of old houses, due to historical reasons, there are a large number of multi-storey buildings with six or seven storeys across the country that do not have elevators installed. In order to facilitate the travel of residents, especially to solve the problem of travel convenience for the elderly, local governments have encouraged and supported the installation of elevators in old houses as a major livelihood project. By the end of 2019, the subsidiary Shanghai Mitsubishi Elevator has launched 30 one-stop service centers nationwide. In 2018, the subsidiary company Shanghai Mitsubishi Elevator completed the installation of 3000 elevators in the old house, and the business grew by more than 30% in 2019.
Profit forecast and investment advice. The company's elevator business industry has a solid position, contributing sufficient cash flow, diversified expansion to create a new profit growth point. It is estimated that the company's EPS in 2020-2022 is 1.06 pound 1.19pm 1.37 yuan, corresponding to PE is 14-12-11 times, maintaining the "hold" rating.
Risk hint: the profitability of elevator business is lower than expected risk, and the development of new business is not as good as expected risk.