3Q20 performance meets performance forecast
The company announced 1-3Q20 results: the company's income was 1.838 billion yuan, an increase of 9.4% over the same period last year, and the mother's net profit was turned around to 1.38 million yuan, in line with the previous performance forecast. In a single quarter, 3Q20's revenue was 601 million yuan, down 4.7% from the same period last year, and its net profit was 80 million yuan, an increase of 34.7% over the same period last year.
The gross profit margin increased slightly in the single quarter, and the financial expenses decreased compared with the same period last year. As the proportion of semiconductor business increased and gross profit margin continued to rise, 3Q20's composite gross margin increased by 2.1ppt to 32.8% compared with the same period last year. Due to the decrease in interest expenses and the stabilization of the value of the Mexican peso, 3Q20's financial expenses decreased by 56.41 million yuan compared with the same period last year, while the financial expense rate decreased by 9.0ppt, while the management and R & D expense rates increased by 2.2/2.0ppt respectively.
The net profit margin increased compared with the same period last year, and operating cash turned negative. The net profit margin of the company increased by 3.9ppt to 13.3% compared with the same period last year, as the expense rate decreased by 5.0 ppt compared with the same period last year. 3Q20 has a net operating cash outflow of 38.09 million yuan, compared with a net inflow of 27.2 million yuan in the same period last year.
Trend of development
Signal system industry resumes, order delivery is expected to accelerate. 3Q20 won the bid for Dalian Line 3 renovation project and Hangzhou Line 3 main line project successively, with a total bid amount of 923 million yuan, an increase of 30.9% over the same period last year. This is the eighth main line project that the company won in Hangzhou.
In addition, the new order for the company's rail transit signalling system from 2017 to 2019 is 26.230.09 / 2.246 billion yuan. Considering that the order delivery period is about 2-3 years, the project is expected to be delivered centrally before the 2022 Asian Games in Hangzhou, and we expect the company's rail transit business to grow in the next two years.
The strategic transformation continues to advance, and we look forward to the volume growth of new semiconductor products. The company's energy-saving and environmental protection business includes water treatment, electric energy conservation and semiconductors: 1) Water treatment: the company plans to transfer 40% 30% of its three major subsidiaries in phases on 2019-20-21. As of October 22, the second phase of the transaction has been completed; 2) Power Energy Saving:
The net profit of 2019/1H20 Zhonghe Investment is-1.46 billion yuan. In order to focus on the main business and enhance the company's profitability, the company plans to transfer not less than 60% of Zhonghe Investment (the first phase of the transaction) to Wangxin Mechatronics (the company's second largest shareholder); 3) Semiconductor: 1H20 Heiner Semiconductor sales orders increased by 57% year-on-year, gross profit margin / net profit margin increased 6.6/4.0ppt. At present, Hainer Semiconductor's domestic share of small and medium-sized silicon wafers is about 60% MUR 70%. In the future, the company will focus on medium-sized silicon wafers and other high-end products. The company expects annual revenue of Heiner Semiconductor to reach 1 billion yuan within three years.
Profit forecast and valuation
Taking into account the tables issued by water treatment companies, we have lowered our 2021 EPS forecast by 13% to 0.35 yuan, leaving the 2020 EPS forecast unchanged. The company's current share price corresponds to 19.8 times the price of 2021.
Taking into account the profit reduction, we lowered the target price by 13% to 8.76 yuan, corresponding to 25 times PPCue E in 2021, with 26% upside space to maintain the "outperform industry" rating.
Risk.
The delivery of rail orders is not as expected; the volume of semiconductor products is not as expected.