The non-net profit deducted in the medium term is basically flat, and the profitability remains stable.
China Longgong achieved operating income of 6.514 billion yuan in the first half of 2020, down 3.6 percent from the same period last year; net profit from home was 940 million yuan, up 6.2 percent from the same period last year; and earnings per share was 0.22 yuan. As equity investment products are included in profit and loss, they contribute 110 million yuan to net profit; after deducting this influence factor, the company's continuing operating net profit is basically flat compared with the same period last year. In the first half of the year, the company's comprehensive gross profit margin was 22.9%, down 0.3 percentage points from the same period last year; the net profit rate was 14.5%, up 1.4 percentage points from the same period last year.
Loaders and excavators recovered significantly in the second quarter.
Affected by the epidemic in the first quarter, the company's loader and excavator sales declined slightly in the first half of 2020, but the year-on-year growth rate of product sales in the second quarter has become positive. Among them, the revenue of wheel loaders in the first half of the year was 3.22 billion yuan, down 3.6% from the same period last year; excavator revenue was 1.28 billion yuan, down 8.9% from the same period last year; forklift revenue was 1.35 billion yuan, down 0.2% from the same period last year; road roller revenue was 50 million yuan, down 33.0% from the same period last year; and parts revenue was 620 million yuan, up 4.6% from the same period last year.
The cash flow performance is sound, the management is stable and efficient, the anti-risk ability is strong, the company is sound, and the cash flow continues to be strong. In the first half of the year, the net operating cash inflow was 470 million yuan, and the total cash inflow was 230 million yuan. The company holds 2.73 billion yuan in free cash at the end of the period, with abundant funds and strong anti-risk ability. In the first half of the year, the expense rates of sales, management and finance remain low, and the efficiency of internal management is high.
Under the tone of the internal cycle, domestic demand remains prosperous, and the performance in the second half of the year is expected to continue to pick up. The central government emphasizes the acceleration of the formation of a new development pattern of "domestic circulation as the main body and domestic and international double circulation promoting each other", which requires the continued release of the potential of domestic demand. The domestic epidemic situation is well controlled, infrastructure projects resume smoothly, and downstream demand increases. It is expected that the construction machinery industry will remain prosperous in the second half of the year. The company's performance in the second half of the year is expected to continue to pick up, and the revenue growth rate will become positive.
Maintain a "buy" rating
We slightly raise the company's 2020 EPS forecast to reflect the impact of financial product gains and losses on performance, and the company's EPS for 20-22 is expected to be 0.33 yuan 0.33 yuan 0.35 yuan respectively. Maintain the target price of HK $2.60 and maintain the "buy" rating.
Risk hint: overseas market demand risk, product price reduction risk, exchange rate fluctuation risk