Event: the company released three quarterly reports, the company's revenue in the first three quarters of 2020 was 656 million yuan, an increase of 6.31% over the same period last year, and the net profit returned to its mother was 158 million yuan, down 1.68% from the same period last year. Q3 achieved revenue of 257 million yuan in a single quarter, an increase of 24.34 percent over the same period last year, and net profit of 57 million yuan, an increase of 16.90 percent over the same period last year.
The epidemic affected the signing and delivery of orders, and the follow-up is expected to continue to recover. Affected by the epidemic since the beginning of this year, the company and customers have delayed resuming work, affecting project acceptance and sales payback. The company's Q1 revenue has declined compared with the same period last year. As the company actively resumes production, Q2 and Q3 have achieved positive growth compared with the same period last year. Similarly, due to the epidemic, the bidding for equipment orders such as the company's detection system and remote sensing treatment has also been affected to a certain extent this year. Contract liabilities have declined to a certain extent compared with the same period last year. We expect that as the impact of the epidemic gradually fades, the company's new orders signed next year are expected to return to a higher level.
The gross profit margin rebounded steadily from the previous month, and the expense rate was continuously optimized during the period. The company's gross profit margin and net profit margin in the first three quarters of 2020 were 42.03% and 24.00%, down 4.14% and 1.40 pct from the same period last year; month-on-month changes were 0.53% and-0.56pct. With the subsequent expansion of the company's production and marketing scale and the delivery of new standard products, profitability is expected to continue to rise. During the period of the company, the expense rate was 18.29%, a decrease of 2.80pct over the same period last year. Among them, the sales expense rate, management expense rate, R & D expense rate and financial expense rate were 6.70%, 8.21%, 3.74% and-0.36%, respectively, with year-on-year changes of-0.49%,-0.62%,-1.76% and 0.07pct. The company's operating cash flow is-77 million yuan, up 29 million yuan from the previous month, and has been continuously optimized since the beginning of this year.
Policy fluctuations do not affect the long-term logic, and extension mergers and acquisitions continue to move forward. Recently, the Ministry of Public Security issued new regulations on exemption from inspection of motor vehicles, which will be adjusted from annual inspection to biannual inspection for non-operating minibuses (except minivans) that have been in operation for less than 6 years and less than 10 years. The new regulations do not affect the strategic layout of the company's operation of downstream vehicle testing stations. According to think-tank data, the number of testing stations per 10,000 vehicles in China in 2019 is only 0.5, compared with 3.51, 2.5 and 2 in Japan, the United States and Europe, and the operating layout of the company's testing stations is still in the early stage, and the follow-up integration market is broad. On October 21 this year, the company revised the fixed increase plan and issued a declaration, raising 1.3 billion of funds for the acquisition of integrity in Linyi and the construction of chain vehicle testing stations. With the fixed increase, the company will continue to accelerate the merger and acquisition of testing stations.
Investment suggestion: we estimate that the company's net profit from 2020 to 2022 is 2.20,3.12 and 416 million yuan respectively, and the EPS is 1.11,1.61,2.15 yuan respectively.
Risk hint: downstream M & An integration is not as expected, M & An asset performance is not as expected.
