Annual report performance high growth, affected by the epidemic in the first quarter performance pressure: the company's 2019 operating income of 6.122 billion yuan, an increase of 12.06% over the same period last year The net profit belonging to the shareholders of the listed company was 427 million yuan, an increase of 218.20% over the same period last year, mainly due to the steady development of the company's whole machine and elevator parts business, and the investment income confirmed by Hitachi Elevator in 2019 increased by 116 million yuan over the same period last year. And the impairment in 2019 was less than 100 million yuan, far lower than the asset impairment loss of 250 million yuan in 2018. The net cash flow generated by the company's operating activities was 239 million yuan, an increase of-12.77% over the same period last year, mainly due to the increase in the purchase of raw materials and inventory. The company's gross profit margin for 2019 was 13.84%, slightly lower than the same period last year. At the same time, the company's annual expenses increased slightly compared with the previous quarter, mainly due to an increase in personnel costs and maintenance costs as orders and production increased, resulting in a 6.63% increase in management costs compared with the same period last year. Affected by the epidemic, the company's performance was under short-term pressure, with revenue of 1.094 billion yuan in the first quarter of 2020, down 4.24% from the same period last year, and net profit of 40 million yuan, down 68.72% from the same period last year.

The income structure continues to improve, strategic customers and overseas orders are doubled: with the increase of elevator ownership, usage and age, the volume of maintenance services will continue to increase, and the maintenance value will be higher. In the future, the elevator industry will gradually adjust from manufacturing to service industry, and the total output value of the industry will continue to rise, and there will still be broad prospects for development. The company keeps pace with the changes of the times and pays more attention to the development of elevator service industry. In 2019, the company's manufacturing revenue was 5.098 billion yuan, accounting for 83.68% of the revenue, an increase of 10.98% over the same period last year, while that of the service industry was 7.75%, accounting for 12.72% of the income, an increase of 29.26% over the same period last year. It is expected that in the future, the company will further optimize its revenue structure and promote a steady increase in the share of the service industry. Affected by the macro-control of real estate, the growth rate of domestic elevator market demand has slowed down, the company continues to adapt to market demand, adjust and optimize product structure, elevator production and sales have increased, 2019 sales of 16000 units, an increase of 3.72% over the same period last year; however, affected by the regulation and control of the real estate market, the project installation progress slowed down, inventory 3227, an increase of 48.92% over the same period last year. The company continues to promote the "two networks and one strategy", integrate direct marketing channel resources, expand the number of strategic customers, and increase market share. The company further consolidates and strengthens the cooperation with the member customers of the China Prudential Alliance and the top 100 housing enterprises in the country, achieving a record high in strategic customer orders, nearly doubling on the basis of the same period last year. In addition, the company seized the development opportunity of "Belt and Road Initiative", worked hard around the Southeast Asian market, and signed contracts for projects in Cambodia, Myanmar and other overseas regions. Product planning capacity, engineering service capacity and technology application capacity have been effectively improved, and the amount of overseas orders has increased by about 126% compared with the same period last year.

Gather the development of rail transit industry to provide strong support for future performance: the company focuses on the development of rail transit industry, under the influence of the development of rail transit system represented by high-speed railway and subway, rail transit station facilities have become a strong growth point of elevator market demand. After winning the bid for "Fuping Railway", "Beijing-Zhang Railway", "Mengxi Railway", "Yinxi Railway" and other projects, as the lead unit, as the "Guangzhou-Hitachi" consortium, the company successfully won the bid for the procurement (including installation) and operation and maintenance projects of escalators and elevators for the new rail transit lines in Guangzhou, with a winning bid amount of 5.496 billion yuan. The project plays an important supporting and promoting role for the company to further expand its business in the field of rail transit. The number and amount of orders won by the company in the rail transit market in 2019 are in the forefront of the industry, providing a strong support for the company's current and future performance growth.

Investment suggestion: we predict that the EPS of the company from 2020 to 2022 is 0.56,0.61 and 0.70 yuan respectively, and the corresponding PE is 12.72,11.65 and 10.19 times respectively. Maintain "recommendation"

Rating.

Risk tips: orders are lower than expected; raw material price volatility risk; downstream demand is lower than expected.