Shanghai Mechatronics released its quarterly report for 20 years: revenue in the first quarter of 2020 was 3.07 billion yuan, down 28.05% from the same period last year, and its net profit was 95.1873 million yuan, down 59.35% from the same period last year, in line with expectations. The transformation of old residential areas is accelerated, and elevators are one of the main beneficiary industries, which are expected to open the growth ceiling and start a new business cycle. Shanghai Mitsubishi as an industry leader is expected to benefit significantly. It is expected that the return net profit in 20 / 21 will rise to 1.168 billion and 1.27 billion, corresponding to 13 times and 12 times of PE in 20 / 21, which is highly recommended.

Operating income and net profit declined compared with the same period last year, mainly because the elevator business was affected by the shutdown and production of the upstream and downstream caused by the epidemic. Among them, revenue and profits in the company's elevator business increased in January compared with the same period last year, and the good growth momentum was forced to stop in February due to the "epidemic". However, the company resumed production on February 10, and elevator manufacturing has been fully restored by March.

Order demand has been delayed and has gradually resumed in late March. The gross margin was 14.66%, down 1.84pct from the same period last year, and the net profit rate was 3.1%, down 0.61pct from the same period last year. The rate of sales expenses is 3.58%, and the rate of management expenses is 5.86%, all of which are maintained at a relatively stable level. 20Q1 received in advance + contract liabilities of 15.5 billion, up 5 per cent from 14.7 billion at the end of 1919 and down 8 per cent from 16.9 billion of 19Q1. In order to make up for the losses caused by the "epidemic" to take orders, the company timely launched the "spring ploughing action". Through supporting incentive measures, the marketing team is required to keep an eye on the established marketing goals and actively strive for orders.

After more than 30 years of development, the company has made and sold more than 900000 elevators. By the end of December 2019, 89 directly affiliated branches have been set up throughout the country, gradually extending and covering the services of product installation, maintenance, repair and renovation, spare parts sales and other services to provinces and cities across the country, and on this basis, more than 360 maintenance service networks have been set up. Shanghai Mitsubishi Elevator pays full attention to the maintenance and development of the relationship with strategic key customers according to the market situation and the trend of strategic customer aggregation. Continue to maintain close cooperation with Evergrande, China Shipping, Greenland, Country Garden Holdings, Longhu, Fudi and other core partners; at the same time, strengthen the tracking of core and major projects in second-and third-tier cities.

In view of the installation of new ladders in old buildings, an one-stop elevator service project has been launched with remarkable results. 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. Shanghai Mitsubishi Elevator actively participated in the installation of this livelihood project, actively explored and launched an one-stop elevator service, that is, to provide residents with the need for the installation of elevators with professional formalities in the early stage, design and construction in the middle stage, and elevator installation and maintenance in the later stage. By the end of 2019, Shanghai Mitsubishi Elevator has launched 30 one-stop service centers nationwide. In 2018, Shanghai Mitsubishi Elevator completed the installation of 3000 elevators in the old house, and the business grew by more than 30% in 2019.

The proportion of business such as installation and maintenance has increased steadily. Shanghai Mitsubishi Elevator continues to expand the development of service industrialization. In the face of the rapid growth of service demand for in-use elevators, especially the renovation of old ladders and the installation of old houses, Shanghai Mitsubishi Elevator has built a new service center, logistics center and training center; establish and improve an effective operation mode in engineering human resource management, process management, service quality, etc. Establish the concept of "service marketing", take the transformation of old ladders and the installation of old houses as a breakthrough, and create a new point of service growth. Shanghai Mitsubishi Elevator comprehensively promotes the application of the Internet of things in engineering services, and strengthens the informationization of installation project management, maintenance and quality inspection. Through the analysis and application of customer information big data, improve business efficiency and improve the ability of management and control. In 2019, the income of service industries such as the installation, renovation, maintenance and maintenance of Shanghai Mitsubishi elevators exceeded 6.5 billion yuan, accounting for more than 31% of the business income.

Give a highly recommended rating. In the medium to long term, driven by the process of urbanization, the real estate market is still expected to maintain steady growth, while the growth in investment in public transport facilities and the renovation of old ladders, as well as the transformation of the service strategy of elevator enterprises, will provide new impetus under the slowdown in the elevator industry. At the end of 1919, the company signed a contract but has not yet completed the performance revenue of 21.7 billion, of which 15.1 billion is expected to be confirmed in 20 years. The transformation of old residential areas is accelerated, and elevators are one of the main beneficiary industries, which is expected to open the growth ceiling and start a new business cycle. Shanghai Mitsubishi as an industry leader is expected to benefit significantly. It is estimated that the return net profit in 20 / 21 will rise back to 1.168 billion and 1.27 billion, corresponding to 13 times and 12 times of PE in 20 / 21.

Risk tips: prices are falling too fast, real estate investment growth is falling faster than expected, and raw material prices are fluctuating.