Revenue and net profit maintained steady growth: the company achieved revenue of 173 million yuan in the first half of 2020, an increase of 19.2% over the previous year; the net profit of the mother was 64.9 million yuan, an increase of 27.7% over the previous year.
Gross margin was 60.4%, up 0.24 pct year on year; net profit margin was 37.6%, up 2.51 pct year on year; sales expenses ratio and management expenses ratio decreased slightly year over year. Among them, rail traffic signal control systems achieved revenue of 141 million yuan, a year-on-year increase of 23.8%, and gross margin of 58.9%; the lightning protection and protection business achieved revenue of 31.88 million yuan, an increase of 2.20% over the previous year, and gross margin reached 67.4%. Net cash flow from operating activities was 19.5 million yuan, a year-on-year decrease of 153%. Mainly affected by the epidemic in the first half of the year, repayment of some projects was delayed, and profitability is expected to continue in the second half of the year.
The first-mover advantage in the market segment is obvious, and it maintains a leading position in the segment: the company has leading technology and rich experience in rail transit lightning protection products and signal meter shaft systems. The company's axle measurement system has obvious competitive advantages in the field of rail traffic signal control. Since 2009, it has been used in more than 100 urban rail transit lines in more than 30 cities across the country, and has been used on some railway lines, leading the market in China. In the field of comprehensive lightning protection, the company is one of the earliest enterprises engaged in lightning protection for railway signals in China. It has pioneered the development of a patented lightning protection junction cabinet in the industry. Up to now, it has implemented more than 4,000 integrated lightning protection systems for stations, ranking in the market.
Benefiting from strong transportation countries and new infrastructure, urban rail has growth potential: from 2011 to 2019, the scale of urban rail transit investment in China continued to increase, with a compound annual growth rate of 14.8%. As an important infrastructure for the country, rail transit is the strategy of a strong transportation country and an important layout direction for new infrastructure. The medium- to long-term construction of transportation infrastructure has received significant support, and rail transit has shifted to high-quality development. Since this year, the NDRC has approved a total of 295 kilometers of urban rail construction plans (including adjustments), with a cumulative investment of 247.3 billion yuan. The rail transit equipment industry will continue to grow.
The company built a new automated production base in Jinwan District, Zhuhai, and is expected to increase significantly in terms of main business capacity scale, core process level, product quality level, etc. Along with the golden opportunity period for urban rail development brought about by strong transportation countries and new infrastructure, the company will continue to benefit as an industry segment leader.
Maintain the “increase in holdings” rating: The company's estimated revenue in 2020-2022 is 399 million yuan, 481 million yuan, and 577 million yuan respectively, and net profit of the mother is 161 million yuan, 198 million yuan, and 242 million yuan respectively. Corresponding to the current stock price, dynamic PE is 28, 23, and 19 times respectively, maintaining the “increase in holdings” rating.
Risk warning: risk of macroeconomic and policy changes; risk of rail transit investment falling short of expectations;