It is expected to benefit from the national network investment plus high and low voltage electrical testing leader, maintain the "buy" rating 1H20 company to achieve revenue / return net profit / deduction non-home net profit 3.1G 0.04 million yuan, year-on-year-15% picks 54% ram 94%, return to mother net profit in line with the median performance forecast (30 million yuan), non-recurrent profit and loss is mainly government subsidy / fair value change profit and loss 2385Universe 1122 million yuan 2Q20 achieves revenue / return net profit / deduction of non-return net profit of 2.2 billion yuan, compared with the same period last year, + 2%, 44%, 5%. The national network investment will be significantly increased in 2020, and the company is expected to fully benefit as the leader in the field of high and low voltage electrical appliances testing in China. We maintain the forecast of 2020-2022 return net profit of 1.7 million yuan, 28,000,000 yuan, corresponding to the EPS of 0.22 yuan, 0.37 yuan, 0.45 yuan, and give the 2021 35x target PE, the target price of 12.89 yuan, maintaining the "buy" rating.
2Q20 revenue / deduction non-return net profit maintained positive growth, deducting non-net profit reached 220 million yuan / yoy+2%, deducting non-return net profit 50 million yuan / yoy+5%, gross profit 53.9% (year-on-year-0.4pct), mainly due to depreciation expenses + 13% year-on-year due to the consolidation of 1200KV 150KA projects in November 19. The expenditure rate during the period is from-1.6pct to 32.6%, of which the sales / management / R & D expense rates are respectively-0.4/-3.2/-0.4pct, mainly due to the decrease in sales expenses and salary during the epidemic period and the social security relief policy. The financial expense rate is year-on-year + 2.5pct due to the reduction of capitalizable financial expenses due to the consolidation of three projects under construction in 19 years. Fair value change / other income (received awards from the government advanced research institute, received in the second half of 19) year-on-year + 992 yuan + 14.22 million yuan; excluding non-recurrent profit and loss of 23.74 million yuan, the net profit margin reached 23.1%, year-on-year + 0.4pct.
The testing income of high and low voltage electrical appliances decreased in the first half of the year compared with the same period last year.
1H20 affected by the epidemic, electrical testing sector revenue declined significantly compared with the same period last year, 1) low-voltage electrical testing:
The revenue of 4770 million yuan / yoy-21%, accounts for 15.2% (year-on-year-1.3pct), the downstream demand of low-voltage testing is relatively stable, and the incremental space comes from the construction of transmission and distribution network and product upgrading, which is expected to recover gradually with the control of the epidemic. 2) testing of high voltage appliances: the revenue is 2.4 billion yuan / yoy-15%, of which the 12kV DC test system project / electromagnetic compatibility project / new energy test system project / electrical environment and climate laboratory with non-raised funds carry out testing services in an all-round way, with a total contribution of 50 million yuan, which is the same as the same period last year. Benefiting from the UHV restart and the increasing demand for new energy (Fengguang nuclear power) / automotive electronic and electrical testing, the company continues to innovate and actively open up the market, high-voltage testing is expected to maintain steady growth.
The company is expected to benefit from counter-cyclical regulation and UHV acceleration, maintain the "buy" rating, and significantly increase the national grid investment in 2020. In July, State Grid (unlisted) said at the mid-year working meeting that it would increase its fixed investment to 460 billion yuan, an increase of 13% compared with the planned investment at the beginning of the year, and is expected to speed up the construction and transformation of UHV supporting projects. As a leader in the field of high and low voltage electrical appliances testing in China, the company is expected to fully benefit. We maintain the forecast of 2020-2022 return net profit of 1.7 million yuan, corresponding to EPS 0.22 yuan, 0.37 yuan, 0.45 yuan, reference to comparable company Wind consensus forecast 2021 PE median 35x, give the company 2021 35x target PE, target price 12.89 yuan (previous value 8.49-8.94 yuan), maintain the "buy" rating.
Risk tip: revenue is lower than expected and profit margins are rising at a slower rate than expected.