Event
According to the company's report for the first three quarters, the company achieved operating income of 642 million yuan in the first three quarters, an increase of 6.31% over the same period last year, and its net profit was 158 million yuan, down 1.68% from the same period last year.
Comment
The epidemic affected the progress of government bidding, and the company's performance was lower than expected.
From a single quarter, the company's operating income in the third quarter was 257 million yuan, an increase of 24.66% over the same period last year, and its net profit was 57 million yuan, an increase of 16.90% over the same period last year, which rebounded significantly compared with the growth rate in the second quarter, but still lower than market expectations. Mainly because in the context of the current epidemic, local governments focused on fighting the epidemic, and the originally expected remote sensing bidding work was postponed, resulting in a sharp decline in orders and revenue from the company's remote sensing business. But looking to the future, bidding will only be postponed but will not disappear. The company has a sound layout and obvious advantages in this business, and is expected to take the lead in obtaining orders, and its market share is expected to reach more than 20% in the future.
Profitability is gradually repaired and cost control continues to be strengthened.
In terms of profitability, the company's gross profit margin in the first three quarters was 42.03%, down 4.14pct from the same period last year; the net profit margin was 24.00%, down 1.40pct from the same period last year. But from a month-on-month point of view, with the end of the epidemic and the gradual clearance of low-margin environmental inspection projects, the company's profitability is on a steady upward trend.
In terms of expense rate, the company's expense rate during the first three quarters totaled 18.29%, down 2.80pct from the same period last year. Among them, the rates of sales, management, finance and R & D expenditure were 6.70%, 8.21%, 0.36% and 3.74% respectively, down 0.49pct, 0.62pct, 0.07pct and 1.76pct respectively compared with the same period last year. With the end of the company's two major R & D projects last year, R & D costs have also dropped significantly, while the company's operational control has also been further strengthened, and the expense rate is expected to continue to decline in the future.
What is the impact of the adjustment of vehicle testing policy on the industry and companies?
Motor vehicle testing policy stone landing. The new policy stipulates that on the basis of exemption from inspection for less than six non-operating minibuses within six years, seven to nine non-operating minibuses (except minivans) within six years will be exempted from inspection. For non-operating minibuses (except minivans) that have been in operation for less than 6 years and less than 10 years, the inspection shall be adjusted from once a year to once every two years.
We believe that the impact on the industry is as follows: the decrease in the frequency of ① testing has led to a drop in the ceiling of the testing service market. according to our estimates, if the price changes of testing services are not taken into account, when the new policy is implemented, the market for testing services will decrease from 77.8 billion to 65 billion in 2021, a decrease of 16.3%. Investors in ② testing stations usually use the rate of return as an anchor. When the frequency decreases, the operator may hedge against the decline in income by raising the price of services, so as to compensate for the ceiling of the market. ③ industry does not change the growth trend, the domestic motor vehicle testing service market is still in short supply. By the end of 2019, there are about 13000 testing stations in China, while the number of cars in the same period has reached 260 million, and the number of testing stations per 10,000 vehicles is only 0.5, which is very different from the average of 2 in Europe and 2.5 in the United States (2017 data). China's motor vehicle testing service market is still a blue ocean market with great growth potential.
To sum up: the impact of policy adjustment on the industry can be controlled. The fundamentals of the company have not changed, and the logic of medium-and long-term growth remains unchanged.
Investment advice:
It is estimated that the company's operating income from 2020 to 2022 will be 9.33,12.27 and 1.655 billion yuan respectively, a decrease of 4.1%, an increase of 31.6% and an increase of 34.8%, respectively, and an increase of 6.1%, 30.6% and 35.8% respectively. The PE corresponding to the closing price on October 31 is 41.3,31.6 and 23.3 respectively. Give a "buy" rating.
Risk Tips:
The acquisition integration testing station is not as expected; the competition pattern of the industry is deteriorating.