3Q20 performance is in line with our expectations
The company announced 1-3Q20 results: revenue / return net profit 606 million million yuan, an increase of 3.5% / 19.6% year-on-year, deducting non-return net profit increased by 21.3% to 129 million yuan over the same period last year, the performance is in line with our expectations. In a single quarter, 3Q20's revenue was 268 million yuan, a year-on-year increase of 10.5% and a month-on-month increase of 10.3%. The net profit of its parent was 63 million yuan, an increase of 3.5% and 6.3%.
The gross profit margin remained stable and the expense rate remained unchanged during the period compared with the same period last year. 1-3Q20/3Q20 's comprehensive gross profit margin increased by 0.5/0.2ppt to 37.3% to 38.0% compared with the same period last year, which we believe is mainly due to the increase in the proportion of smart meter products with high gross margin. During the period of 1-3Q20/3Q20, the expense rate decreased by 0.5 / increased 0.1ppt compared with the same period last year, and the sales / management / R & D / financial expense rate of 3Q20 decreased by 0.7 / 0.3 / 0.2 / 1.2ppt.
Net profit margin fell slightly in a single quarter, while operating cash was generally flat. 1-3Q20/3Q20 's net profit margin rose year-on-year, 3.1ppt/ fell 1.6ppt to 23.4% Universe 23.4%. By the end of the 3Q20 period, the balance of the company's accounts receivable increased by 1.52 million yuan to 567 million yuan compared with the same period last year, and 3Q20 company calculated a credit impairment loss of 6.13 million yuan. The net operating cash outflow of 1-3Q20/3Q20 company was 12.24 million yuan, which was 1180 / 1.69 million yuan more than that of the same period last year.
Trend of development
Continue to promote the transformation of intelligent water services. In 2019, the company sold about 2.4 million smart water meters, of which NB-IOT Internet of things accounted for 60%. 1H20's smart meter business accounted for 54% of total revenue, an increase in 2ppt compared with the same period last year. Since the third quarter, the company has successively won the bid for Shanghai City Water Investment NB-IoT meter procurement project (136500) and Tianjin Water supply Group IC card water meter procurement project (DN15 30,000, DN20 120,000), continuing to consolidate its market position in Tianjin, Shanghai and other cities. In addition, in order to further focus on the main business, the company transferred 9.19 million TECO shares with 31.44 million yuan in June, and the equity transfer transaction had been completed by the end of the 3Q20 period.
Profit forecast and valuation
Due to increased competition in the market, we have lowered our revenue forecast for 2020 to 2021 by 11% to 8%, but due to product upgrades and good control of expense rates, we have maintained our company's 2020x21 EPS forecast unchanged. The current share price corresponds to 27.8 times / 23.3 times 2020 pound E for 21 years. We maintain the company's target price of 6.56 yuan, which corresponds to 25 times Ppace E in 2021, which has 7% upside compared to the current stock price, and maintains the "outperform industry" rating.
Risk.
The promotion of smart water meters is not as expected.