Events:
Jinchuang Group (603680) released the minutes of the institutional exchange meeting on November 5th, and the company's 3C business and 5G new infrastructure related business orders have been launched. In the next 3-5 years, the company will expand and strengthen the main rail transit business, on this basis will expand business and explore new business opportunities.
Main points of investment:
Rail vehicle supporting products industry is absolutely the leader, benefiting from the rapid growth of the urban rail market.
The company is the industry leader of rail transit vehicle supporting products, with a market share of more than 40% for bullet trains and subways.
From 2017 to 2019, the revenue of the company's supporting products for urban rail transit subway vehicles was 1.374 billion yuan / 1.631 billion yuan / 1.936 billion yuan respectively, with an average annual growth rate of more than 18%. Benefiting from the sustained high growth of urban rail transit investment, the high growth of rail transit supporting business from 2020 to 2022 is expected to continue. In the first three quarters of 2020, the company signed 3.07 billion yuan in new contracts or orders, an increase of 3 percent over the same period last year. Among them, newly signed contracts or orders exceeded 1.4 billion yuan in the third quarter, showing a strong rebound.
Operation and maintenance market potential is huge, the company's active layout, the future can be expected.
According to the data of "Information of China Rail Transit Association", by 2019, the operating mileage of urban rail transit in China has reached 6736 km, and the total scale of China's urban rail operation and maintenance market has exceeded 67 billion yuan. With the new lines put into operation and the aging and updating of some lines, it is estimated that the market scale of urban rail transit operation and maintenance services in China will reach 90 billion yuan in 2022. Although the company was affected by COVID-19 's epidemic situation in the first half of 2020, the business income of maintenance and maintenance business still increased, reaching 130 million yuan.
3C electronic OEM / ship matching / rail transit overseas and other businesses are launched at the same time to create new space for growth.
The company's Indian plant has been put into production and profits are expected. The orders being executed include 800000 mobile phones for processing and production, 400000 sets per set of other products and trial production orders from a number of customers. With the weakening of the impact of the epidemic, customer orders gradually increased. After full production, it can produce 24 million smartphones and other 3C products per year, which is expected to contribute 176 million yuan in profits.
The company is actively expanding the new market of the main business, and has entered the field of ship supporting, which is expected to take the lead and gain new momentum of growth. Ship supporting products are similar to the current main business, and the company has advantages in technology and production capacity. The construction of domestic cruise ships has just started, and the demand for supporting ships is expected to continue to expand.
The company's overseas business continues to advance, with the advantage of high quality and low price, the overseas market share is expected to increase in the future. The company's products have entered Bombardier, Alstom, Siemens and other international customer systems, opening the way for future growth.
The company successfully acquired Jinchuang Electrical Engineering to further improve the supporting capacity of electrical equipment. The company recently acquired a 50% stake in Jinchuang Electric held by Xiaomi Yuzuo, a Japanese company, making it a wholly-owned subsidiary.
Jinchuang Electric's main business products include motor cars, urban rail supporting electrical equipment. The company is expected to rely on Jinchuang's products, qualifications, technology and customer resources to further enhance its comprehensive strength and promote the growth of both revenue and net profit.
We expect the company's revenue to grow by 5% in 2020, and net profit to grow faster than revenue.
From 2021 to 2022, the company's revenue is expected to accelerate in an all-round way, driven by positive factors such as the increase in the proportion of revenue from rail traffic operation and maintenance, the landing of new businesses such as 3C contract manufacturing and ship supporting, the integration of Jinchuang electrician, and the recovery of overseas rail transit market. The growth rate is 16% and 12% respectively. From 2020 to 2022, the company's net profit is expected to be 429 million yuan / 545 million yuan / 628 million yuan, corresponding to EPS of 0.54,0.69,0.79 yuan respectively. According to the closing price of 11.40 yuan, the corresponding PE is 21x, 16.5x, 14.3x.
Cover for the first time, giving the company a "recommended" rating.
Risk hint
Operation and maintenance market development is not as expected, 3C business and overseas business development is not as expected, the epidemic has affected the development of overseas business.