The company released its report for the third quarter of 2020. Q3 achieved revenue of 660 million (+13.4%) and net profit of 56.45 million (-11.1%); revenue of 1.59 billion (+2.0%) and net profit of 120 million (-44.4%) in the first three quarters.
Performance improved quarterly, cumulative revenue growth turned positive, and valuations were low. Maintain the buy rating.
Key points to support ratings
The quarterly improvement in performance was in line with expectations, the cumulative revenue growth rate was corrected, and Q3 profit increased 20% after the exchange loss factor was excluded. Q3 revenue continued the Q2 trend and led to a correction in revenue growth in the first three quarters of the pandemic year. Net profit was 56.45 million (-11.1%), the decline was significantly reduced, and continued month-on-month increases were achieved. Financial expenses increased by about 26 million yuan over the previous period, mainly including convertible bond fees and exchange losses. Based on estimates of the volume of debt converted, the exchange loss after deduction may be 20 million yuan. As a result, excluding exchange losses, Q3 net profit is expected to reach 76 million, an increase of about 20% over the previous year.
New demand is strong, such as smart logistics sorting systems, and traditional overseas markets are also expected to pick up. The current stage driving the company's performance growth includes logistics (sorting systems), finance (smart devices), new retail, and new energy (charging and switching cabinets). Among them, the sorting system ushered in a stage where the penetration rate rose rapidly, and the company promptly seized the opportunity to connect with important customers in the industry. Meanwhile, traditional businesses, especially overseas markets, are expected to fully recover. According to data released by the General Administration of Customs on October 13, China's total import and export value in Q3 was 8.88 trillion yuan (+7.5%), including exports of 5 trillion yuan (+10.2%) and imports of 3.88 trillion yuan (+4.3%), all of which reached record quarterly highs. Considering the combination of the US election cycle coming to an end, the company's overseas revenue is expected to fall slightly or even out throughout the year.
Management buys back and is optimistic about long-term development. The chairman and general manager increased their shares by 0.45% and 0.30% during the reporting period, reflecting confidence in the company's long-term development, which is in line with fundamental performance such as perfect layout, business opportunity reserves, and performance growth potential.
valuations
Net profit forecasts for 2020-2022 are expected to be 350 million, 4.4 billion, and 530 million yuan, EPS is 0.55 yuan, 0.74 yuan, and 0.92 yuan (the reduction is about -4 to -14% reflecting the impact of the epidemic), and the corresponding PE is 19, 15, and 13 times. Demand from the company's main business picked up, the expansion of new tracks was fruitful, and the purchase rating was maintained.
The main risks faced by ratings
Order delivery fell short of expectations; demand for vaccination weakened.
