Incident: The company released its 2020 quarterly report, achieving operating income of 69.361 billion yuan, -4.18% year on year; net profit of Gumo was 610 million yuan, -32.72% year on year; net profit of non-Gumo was 515 million yuan, or -38.76% year on year.
First-quarter revenue remained steady, and profits were under pressure in the short term. The company's 2020 Q1 performance declined somewhat due to the impact of the pandemic. 2020Q1's revenue was 69.361 billion yuan, -4.18% year on year, and revenue remained steady; Guimu's net profit was 610 million yuan, -32.72% year on year. Profits affected by the pandemic were under pressure in the short term.
Gross margin -0.70 PCT, period expense ratio +0.05 PCT. 1) The company's gross profit margin of 2020Q1 was 2.37%, -0.70 PCT year-on-year. 2) The company's expense ratio for the 2020Q1 period was 2.40%, +0.05 PCT over the previous year, respectively, with a sales expense ratio of 0.64%, year-on-year -0.04 PCT; management expense ratio 0.68%, year-on-year -0.02 PCT; financial expense ratio of 0.59%, +0.10 PCT over the previous year. The increase in financial expenses was mainly due to an increase in bank loans and ultra-short loans, and interest expenses increased 26.07% year-on-year; 3) The company's 2020Q1 operating cash flow- 8.894 billion, down from the same period last year (-4.341 billion), mainly due to the increase in cash paid for goods purchased in the current period.
Supply chain integration services are the company's core advantage, and business model innovation will be the biggest growth point. The company focuses on supply chain business, transforming and upgrading from a traditional distribution model to a modern industrial ecosystem organizer model. The company took the lead in proposing the “Circulation 4.0” concept in China, supported by “four-stream linkage” of commercial flow, logistics, capital flow and information flow. Platform advantages and scale advantages provide a good foundation for the company's supply chain integration business, and obtain value-added benefits while reducing costs for upstream and downstream enterprises in the supply chain. For major engineering projects, the company uses a one-stop system solution to implement project allocation. For example, the design life span of the Hong Kong-Zhuhai-Macao Bridge is 120 years. It is the first time in China that stainless steel rebar is used for construction. The company cooperated with Shanxi Taigang to fill domestic gaps and reduce project costs, and was awarded the title of Excellent Supplier by the Hong Kong-Zhuhai-Macao Bridge Administration.
Actively explore cutting-edge technology, and the blockchain system service platform solves receivables bottlenecks. The company is actively developing cutting-edge technology and has collaborated with Zheshang Bank to innovatively apply a blockchain system service platform. Through joint collaboration with upstream and downstream customers and financial institutions, the payment and financing attributes of accounts receivable originally settled are activated, and the short business chain is opened up to the entire industry chain, thus properly resolving the bottleneck in receivables and maintaining healthy cash flow development. Currently, the company is actively discussing the development and application of digital supply chain and blockchain finance in commodity supply chain scenarios with relevant platforms such as Ant Financial and Ping An One Account.
Profit forecasts and investment recommendations. The company's net profit is expected to be 28.3/33/3.5 billion in 2020-2022. The corresponding EPS is 0.55/0.64/0.70 yuan, and the price-earnings ratio is 8.3/7.1/6.6 times, maintaining the “buy” rating.
Risk warning: macroeconomic fluctuation risk, financial risk, high-end industrial risk.