matters
The company released its 2020 semi-annual report. During the reporting period, it achieved revenue of 426 million yuan, a decrease of 18.42%; Guimu's net profit was 22 million yuan, a decrease of 62.64%. Among them, Q2 quarterly revenue was 245 million yuan, down 15.05% from the same period last year, up 35.36% from the previous quarter, and Guimu's net profit was 11 million yuan, down 73.46% from the same period last month.
The epidemic affected production, and performance may continue to improve in the second half of the year
Due to the COVID-19 pandemic in the first half of 2020, transportation, personnel, supply chain and other factors affected the company's failure to produce effectively for about 3 months, which led to a sharp decline in the company's revenue and profit. In particular, revenue fell 22.57% in the first quarter. However, beginning in the second quarter, as the impact of the epidemic improved, the company's revenue recovered rapidly, increasing 35.36% over the previous month. Looking ahead to the second half of the year, driven by new infrastructure, the downstream operating rate of aluminum processing will continue to rise, and the company's performance may continue to improve.
Accelerated development of new products is expected to become new business increments
The company's high-purity silicone-free hydrogen fluoride project has completed the production of pilot production line equipment (new reactor). Equipment installation is currently underway to achieve trial production and customer trial as soon as possible. At the same time, the company uses by-products from the industrial chain to further develop and derive SB powder, the raw material for petroleum catalyst carriers. It has completed the installation of pilot production line equipment and pipelines, and is undergoing equipment commissioning. It is expected that production will be quickly put into operation with the production and operation of high-purity silicone-free hydrofluoric acid. Furthermore, the prefabricated aluminum alloy bars developed by the company are used for downstream drawing to make communication optical fiber cables. Since the composition of this type of conductor alloy is complex and the mechanical performance requirements are extremely high, it is currently mainly imported. Currently, it has entered pilot research, and it is expected that import substitution will be achieved in the future. All three new products are in the pilot stage. Once mass-produced, they are expected to become new business increments.
Implement equity incentives to demonstrate confidence in future development
The company granted 3.2 million stock options to 13 people, including middle and senior management personnel and core technical personnel. The assessment target was net profit for 21-23 based on 2019, which increased 20%, 50%, and 80%, respectively, to 113 million, 141 million yuan and 169 million yuan. By improving the company's long-term and effective incentive and restraint mechanism, the company is deeply bound to management, the enthusiasm and creativity of managers and employees are effectively mobilized, and confidence in future development is demonstrated.
Profit Forecasts and Ratings
Due to the impact of the epidemic, the company's production and operation were affected. The company's profit forecast was lowered. The company's profit forecast for 20-22 was 0.65, 1.25 and 150 million yuan respectively (before 20-21 was 350/447 million yuan), and EPS was 0.41, 0.78 and 0.94 yuan/share respectively. The corresponding closing price PE on August 28 was 54X, 28X and 23X respectively, taking into account the company's equity incentives and accelerated development of new products, maintaining the increase rating.
Risk warning: The risk that the production capacity of the company's products falls short of expectations, the risk that the company's production and operation will continue to be affected due to the spread of the epidemic, and the risk of rising costs due to large fluctuations in raw materials.