The performance was in line with expectations. The company released its report for the third quarter of 2020. It achieved revenue of 1,140 million yuan in the first three quarters, an increase of 1.04% over the previous year; Guimu's net profit was 460 million yuan, an increase of 256.74% over the previous year.
Q3 achieved revenue of 379 million yuan in a single quarter, a year-on-year decrease of 52.93%; Guimu's net profit was 133 million yuan, a year-on-year decrease of 5.21%.
Profitability has increased dramatically. 1) On the cost side, due to the starting volume of RSU, gross margin increased significantly by 27.74 pct compared to the same period last year; 2) In terms of expenses, the cost ratio for the period increased by 3.89 pct compared to the same period last year. Among them, the sales expenses ratio increased by 0.36 pct, and the management expenses rate including R&D increased by 4.02 pct; 3) In terms of cash flow, net operating cash flow for the first three quarters increased 277.15% over the same period last year.
It has both short, medium, and long-term investment logic. 1) In the short term, following the explosion of the ETC OBU market last year, the RSU business will contribute significant results in 2020. 2) In the medium term, we are optimistic about the company's ETC post-application market represented by urban parking lots and other fields, as well as the front end of OBU. Furthermore, after the 312 accident in Wuxi, overrun regulations were strictly enforced across the country, and the weighing business is expected to achieve high growth. 3) In the long run, the 5G V2X Internet of Vehicles relay, the company is leading the layout of C-V2X intelligent connected base stations and lidar, pointing to a broader market.
Investment advice: The company's EPS is expected to be 5.27 yuan and 7.23 yuan respectively from 2020 to 2021, maintaining the “Buy-A” investment rating.
Risk warning: Uncertainty about 5G-V2X technology solutions and applications; industrial chain collaboration is complex; demand explosion puts pressure on industrial chain supply; market competition intensifies
