Event: the company released its 2020 quarterly report, with revenue of 17.118 billion yuan in the first three quarters of 2020, + 2.21% year-on-year; net profit of 919 million yuan, + 1.50%; and non-return net profit of 871 million yuan, + 4.15%.
Main points of investment
The elevator industry continues to recover, and the company's Q3 performance exceeds expectations
Q3 achieved revenue of 6.141 billion yuan, + 3.93% year-on-year, and net profit of 326 million yuan, + 22.02% over the same period last year, slightly exceeding market expectations. The reasons for the big increase in the company's Q3 performance are: the recovery of the ① downstream real estate chain. 2020Q3 completed domestic real estate development investment of 4.07 trillion yuan, + 11.83% year-on-year, new housing construction area of 625 million square meters, + 3.91% year-on-year, and the national housing prosperity index returned to 100. Benefiting from this, the elevator industry produced a total of 893000 units from January to September 2020, a year-on-year increase of 4.6%. The elevator industry continues to improve. ② with the effective relief of the domestic "epidemic", the affected real estate and infrastructure construction is recovering rapidly, thanks to the company's "41st" action, and the demand for elevator products began to recover in the second quarter, the company's 2020Q3 order sales exceeded expectations. In July, the company made a historic breakthrough of "monthly production, delivery, and contract volume of more than 10,000". By the end of 2020Q3, the company's contract liability was 15.327 billion yuan, + 2.1% compared with the same period last year, with sufficient orders on hand and steady growth in short-term performance.
Profitability improved, operating cash flow improved significantly in the first three quarters of 2020, consolidated gross margin of 16.56%, year-on-year + 0.02pct; net interest rate of 8.46%, year-on-year + 0.16pct. Q3 single-quarter gross profit margin of 17.08%, year-on-year + 0.81pct; net profit margin of 8.31%, year-on-year + 0.93pct, profitability continues to improve. During the first three quarters of 2020, the expense rate is 7.51%, year-on-year-0.2pct, of which the sales expense rate is 2.43%, year-on-year-0.69pct, and the management expense rate (including R & D) is 6.15%, year-on-year + 0.34 pct. The decline in expense rate is an important reason for the continuous improvement of the company's profitability.
In the first three quarters of 2020, the net operating cash flow was 1.051 billion yuan, + 445.87% compared with the same period last year, mainly due to the increase in the inflow of goods sold by its subsidiaries in the current period, while the daily operating expenses such as labor expenses, taxes and fees decreased.
The price war in the elevator industry is gradually eliminated, and the prosperity of the industry is expected to continue the fierce price war experienced by China's elevator industry since 2015, which obviously kills the profits of enterprises. At present, under the situation that the profitability of elevator enterprises has been greatly weakened, the industry no longer has room for substantial price reduction, and elevator prices are expected to stabilize. On the demand side, the installation of elevators in old buildings has attracted the attention of local governments as a livelihood work, which will bring new increments to the elevator industry, taking into account elevator renewal, rail transit, traditional real estate and other areas of elevator demand, China's elevator industry demand is expected to grow steadily, the company as the industry leader will continue to benefit.
Profit forecast and investment rating: we expect the net profit from 2020 to 2022 to be 1.272 billion, 1.387 billion, 1.14, 1.24, 1.36, respectively, with a "buy" rating of the previous share price PE, which is 16-14-13.
Risk hint: the recovery of the downstream real estate chain is lower than expected, and competition in the industry intensifies.