Event
The company recently released its semi-annual report for 2010. during the reporting period, the company achieved operating income of 2.958 billion yuan, an increase of 5.9% over the same period last year; the net profit belonging to the parent company was 312 million yuan, an increase of 9.8% over the same period last year; gross profit margin and net profit margin were 13.5% and 10.6%, respectively.
Main points of investment:
With rapid growth in the second quarter, Hitachi Elevator is expected to pick up in the second half of the year: from a quarterly point of view, the company realized operating income of 1.094 billion yuan (YoY-4.2%) and net profit of 40 million yuan (YoY-68.7%) in the first quarter, while operating income of 1.863 billion yuan (YoY+13.0%) and net profit of 272 million yuan (YoY+74.5%) in the second quarter. Affected by COVID-19 's epidemic situation, the industrial chain of the elevator industry has not yet fully recovered in the first quarter, and the company's performance has declined. The domestic epidemic situation gradually stabilized in the second quarter, the resumption of work and production continued to advance, and the growth rate of elevator sales rebounded, leading to the steady growth of the company's performance. In the first half of the year, Hitachi Elevator (China), the company's shareholding company, realized operating income of 9.066 billion yuan (YoY-20.9%) and net profit of 765 million yuan (YoY-28.1%). The performance of Hitachi Elevator (China) has declined greatly, which we believe is mainly due to the impact of the epidemic on the mid-and high-end elevator market. With the weakening of the impact of the epidemic and the recovery of the industry in the second half of the year, the performance of Hitachi Elevator (China) is expected to gradually recover, further thickening the company's profits.
The recovery of real estate investment has led to the recovery of the elevator industry, and the old reform plus rail transit has opened up new space for growth: from January to July 2020, the total investment in real estate development increased by 3.4% compared with the same period last year, while the national output of elevators, escalators and elevators increased by 2.2% over the same period last year. China's real estate investment recovered quickly after the epidemic, which led to the recovery of the elevator market. In addition, the "two new and one heavy" continues to advance, and the demand for the retrofitting of elevators and rail escalators has also opened up a new growth space for the industry. In terms of old renovation, Hitachi elevators have been installed in more than 7300 old houses across the country, and Hitachi provides elevator services for more than 65% of the old buildings in Guangzhou. In the field of rail transit, Guangri Elevator and Hitachi Elevator won the track escalator project of 3.32 billion yuan and 3.71 billion yuan respectively from 2018 to the first half of 2020, forming a strong support for the company's future profits.
Profit forecast and investment advice: we estimate that the company's net profit in 2020, 2021 and 2022 is 5.20,5.90 and 658 million yuan respectively, and the corresponding EPS is 0.60,0.69,0.77 yuan respectively, maintaining the company's "overweight" rating.
Risk factors: epidemic control is not as expected, real estate and rail transit investment is less than expected risk, industry competition intensifies risk, raw material price fluctuation risk, investment return is less than expected risk and so on.