What happened: the company released its semi-annual report for 2020. In the first half of 2020, the company achieved a total operating income of 225 million yuan, + 13.33% compared with the same period last year, and a net profit of 33 million yuan, + 31.21% over the same period last year. The performance exceeded expectations.
Comments:
The upward rise in sugar prices has led to an increase in revenue from sugar products, and the revenue from power products has been gradually realized. In the first half of the year, the company's main business of sugar products, prefabricated fragments and power products realized revenue of 98 million yuan, 54 million yuan and 69 million yuan respectively, accounting for 43.38%, 23.84% and 30.61% of revenue respectively. Sugar products are still the company's main source of income; the proportion of revenue from power products increased from 24.05% in the previous period to 30.61% in the current period, making it the company's second largest source of revenue. In the first half of the year, revenue from sugar products and power products increased positively, with + 8.47% and + 44.23% respectively compared with the same period last year, while prefabricated fragments were slightly-3.85% compared with the same period last year. The steady rise in sugar prices and the cashing of income from power products invested in the previous period are the main reasons for the improvement of performance.
The gross profit margin has increased significantly. In the first half of the year, sugar prices rebounded to improve profit space; Shenyang energy and sublimation power supply operated well, and the operating efficiency increased steadily; and military products further promoted cost control, improved quality and efficiency, and enhanced comprehensive competitiveness. In the first half of the year, the company achieved a gross profit margin of 39.34%, an increase of 4.17% over the same period last year; a net profit rate of 17.24%, an increase of 1.94% over the same period last year; and an expense rate of 15.42%, down-2.06% from the same period last year.
The upward logic of sugar prices remains unchanged, and the competitive advantage of military products is stable. According to wind, the average spot price index of sugar in the first half of the year was 5579 yuan / ton, an increase of 8.31% over the average of 5151 yuan / ton in the same period last year, and the profit space for sugar products expanded. From a macro point of view, the short-term destocking of sugar in India and Thailand has put pressure on international sugar prices, but the large-scale production reduction in the main producing countries in recent years is the main support of the upward international sugar prices, and the upward logic of medium-and long-term sugar prices remains unchanged, which is good for the company's sugar trading business. In terms of military business, Shenyang Haneng has a relatively stable competitive position in the field of tungsten alloy prefabricated fragments, the product performance is good, it has been recognized by the military, and it has established a good cooperative relationship with a number of arsenals. It is a major supplier of prefabricated fragments for some conventional shells and new rockets. Sublimation Power supply has a full range of military industrial qualifications, mainly serving airborne, shipborne, missile-borne and other weapon platforms, and its main customers include domestic well-known military enterprises, military research institutes, military factories and so on.
Investment advice: the company is mainly engaged in sugar trade and military products, sugar prices upward to increase profit space, military products to maintain a stable competitive advantage, power products. We expect the company's earnings per share in 2020 / 2021 to be 0.230.27 yuan, respectively, and the current share price is 45.04 times PE, maintaining a "cautious recommendation" rating on the company.
Risk tips: a sharp decline in sugar prices, increased competition in the military industry, and so on.