Incident: New Beiyang released its report for the third quarter of 2020. The company achieved operating revenue of 1,589 million yuan in the first three quarters, an increase of 1.98%; net profit attributable to shareholders of listed companies was 122 million yuan, a decrease of 44.40% over the previous year: net profit returned to the mother after deduction was 110 million yuan, down 32.54% from the previous year, and operating cash flow was 5,8074 million yuan, down 95.97% from the previous year.

The decline in Guimu's net profit gradually narrowed, and the gross margin level stabilized: affected by the epidemic, the company's revenue and net profit declined in the first half of the year. With the orderly resumption of production and operation activities in the second half of the year, overall revenue for the first three quarters achieved positive growth. Among them, the third quarter achieved operating income of 658 million yuan, an increase of 13.40% over the previous year; the net profit of Gui Mu Company was 56.473 million yuan, a year-on-year decrease of 17.73%. In terms of profit, the company achieved operating income of 658 million yuan, an increase of 13.40% over the previous year; after deduction, the company's gross profit for the first three quarters was 53.606 million yuan, a year-on-year decrease of 17.73%. 35.49%, down 1.54 pct from the same period last year; looking at a single quarter, the gross profit margin was 36.47%, down 2.78 pct from the previous year, and remained stable over the previous quarter. In October, Digital Technology, a wholly-owned subsidiary of the company, won the bid for the “State Grid Electric Vehicle Service Co., Ltd. 2020 Low-speed Vehicle Switcher Cabinet Frame Procurement Project”, which is expected to provide 3,600 power frames to meet the implementation of the State Grid electric vehicle switchboard project in various cities across the country. This bid will be important for expanding the scale of charging and switching application scenarios and solutions related to smart new terminals in the company's emerging business fields The driving effect.

The cost rate for the period increased sharply, and the cash flow declined significantly: the company's rate for the first three quarters of 2020 (excluding R&D) was 16.93%, up 3.32% from the same period last year, of which sales expenses were 141 million yuan, an increase of 30.73% over the previous year, mainly due to the increase in financial product maintenance services and market development expenses of new retail businesses; management expenses of 97.924 million yuan, a decrease of 5.92% over the previous year; financial expenses of 3,00502 million yuan, an increase of 46,447.87% over the previous year, mainly due to the company's increased costs of issuing convertible bonds and Jiang's loss. On the R&D side, the company continued to conquer new products and technologies. The total R&D expenses for the third quarter were 257 million yuan, which is basically equivalent to the same period last year, accounting for 16.19% of total operating income. In terms of cash flow, the company's operating activity cash flow for the first three quarters was 580.74 million yuan, a decrease of 95.97% over the previous year, mainly due to an increase in payments for production materials preparation and procurement materials (cash outflow from operating activities increased 111 million yuan over the same period last year); in addition, cash flow from investment activities was 562 million yuan, a decrease of 3,367.37% over the same period last year.

Investment advice: The company is expected to achieve operating income of 26.64, 32.49, and 3.854 billion yuan in 2020-2022, and achieve net profit of 3.41, 400, and 465 million yuan. EPS is 0.51, 0.60, and 0.70 yuan respectively. Corresponding PE is 19X, 16X and 14X, maintaining the “recommended” rating.

Risk warning: strategic emerging business expansion falls short of expectations; intelligent logistics penetration falls short of expectations; R&D progress falls short of expectations; import and export business is blocked; competition in the automation equipment industry is intensifying.