Investment event: Henghua released its Quarterly report for 2020 on the evening of October 23, 2020.
Comments:
The main results are as follows: (1) the epidemic affects the clearance, and the performance of Q3 increases obviously. The company's 2020Q3 achieved an operating income of 270 million yuan in a single quarter, an increase of 25.52% over the same period last year, and a net profit of 59 million yuan, an increase of 52.69% over the same period last year. With the accelerated progress of project acceptance and project quantity settlement in the third quarter of the company, some of the unrecognized income in the first half of the year was cashed in the third quarter. In addition, the company's Q3 single-quarter sales expenses were 13.5298 million yuan, a sharp increase of 61.10% over the same period last year, further reflecting that the company's offline and on-site deployment of the project in the third quarter returned to the pre-epidemic level. The company's project settlement and delivery are concentrated in Q4, which will provide a guarantee for the company's annual operating performance growth.
(2) the cash flow of business activities has been greatly improved. The net cash flow of operating activities in the first three quarters of 2020 was 177 million yuan. The net operating cash flow of Q3 in a single quarter was 250 million yuan, an increase of 627.25% over the same period last year. The increase was mainly due to the repayment of project contracts and the recovery of project performance bonds, which reached the best level in history. The transformation of the company's cloud strategy will change the company's business income from low frequency to high frequency, and it can be predicted that the company's cash flow will continue to improve in the future.
(3) the bottom technology platform of BIM builds the core competition barrier of power grid informatization. The company's gross profit margin in the first three quarters of 2020 was 49.93%, an increase of 7.13 pct over the same period last year, mainly due to the continuous improvement of the business structure driven by the construction of the company's BIM platform, and the high gross margin plate of power grid design has become the main engine driving the company's performance growth. We believe that the company is expected to continuously improve the construction and management capacity of power grid assets throughout the life cycle through the BIM technology platform, and build the core competition barrier of the power grid information industry. The reasons are as follows: 1) the company invested 72 million yuan in R & D in the first three quarters of 2020, an increase of 8.61% over the same period last year, and R & D investment has stabilized at more than 100 million yuan in recent years. Continuous high-intensity R & D investment will help the company to enhance the core technical barriers of BIM. 2) the company has participated in the formulation of three-dimensional design standards for national and southern power transmission and transformation projects, and has obvious first-mover advantages in the new 35kv and above power transmission and transformation projects of the national power grid. 3) the company's BIM technology application deeply meets the needs of power grid enterprises, and the market share of BIM technology application in the power industry has exceeded 50%, and the domestic BIM software leader is emerging.
Investment suggestion: the company reported better than expected in the third quarter of 2020, forecasting a net profit of RMB 3.53,3.96 and 493 million respectively for 2020Universe 2022, and RMB 0.58,0.65,0.81 for EPS, corresponding to PE 20.54X, 18.33X and 14.72X, giving a "buy" investment rating for the first time.
Risk tips: BIM promotion was not as expected, accounts receivable surged, and the epidemic was repeated in the fourth quarter.