2019 profit is in line with expectations, slightly lower profit forecast
In 2019, the company realized revenue / return net profit / deduction of non-return net profit 8.1 billion, 1.7 billion, compared with the same period last year, + 13.8%, 30.2%, 36.6%, and the performance was in line with expectations. The company estimates that 1Q20 will lose 430 million to 48 million yuan affected by the epidemic. We slightly downgrade the company's profit forecast. The estimated return net profit for 2020-21 is 170 million yuan, corresponding to a 20-21 EPS of 0.22 million yuan 0.37 yuan (the previous value is 0.29 yuan 0.41 yuan). The introduction of 2022 return net profit forecast is 340 million, giving 20-year 38-40x target PE, target price 8.49-8.94 yuan, maintaining the "buy" rating.
The performance is in line with expectations, and the main business blossoms more often.
The company released its annual report that in 2019, the revenue / return net profit reached 81200,000 million, compared with the same period last year, which was + 13.8% and 30.2%, and the performance was in line with expectations. Sub-business point of view: 1) low-voltage electrical testing: revenue 130 million yuan (year-on-year + 10.7%), revenue accounted for 16.7% (year-on-year-0.4pct), low-voltage testing downstream demand is relatively stable, incremental space comes from transmission and distribution network construction and product upgrading. 2) High voltage appliance testing: the revenue is 620 million yuan (year-on-year + 13.1%), the growth rate is fast, mainly due to the smooth development of the 12kV DC test system project / electromagnetic compatibility project / new energy test system project, which are not funded by fund-raising, with a total contribution of 140 million (year-on-year + 60.8%), benefiting from UHV restart and good demand for new energy (Fengguang nuclear power) / automotive electronics and electrical testing. The company is currently actively developing the market, and high pressure is expected to maintain sustained and steady growth.
Affected by COVID-19 's epidemic situation, 20Q1 performance is expected to lose money.
According to the company's first-quarter performance forecast, 20Q1 is expected to lose 430 million to 48 million yuan (1Q19 profit is 16.1 million yuan), of which the impact of non-recurrent profit and loss on net profit is about 2.5 million yuan to 3.5 million yuan. The first-quarter performance loss was mainly due to the impact of the COVID-19 epidemic incident, 20Q1 operating revenue significantly decreased compared with the same period last year, as the testing industry inherent cost rigidity and operating leverage determined a greater decline in performance, resulting in the company 20Q1 recorded a performance loss. We believe that with the basic blocking of domestic epidemic transmission channels, 20Q1's delayed orders are expected to accelerate in the next three quarters, which will drive the company's performance to pick up.
Counter-cyclical regulation + UHV acceleration, the increase of national grid investment is good for the company's performance.
State Grid investment increased significantly in 2020. According to the disclosure of State Grid, an initial grid investment of 450 billion yuan was arranged in 2020, an increase of 12.5% over the planned investment at the beginning of the year. During the year, emphasis was placed on promoting investment in areas such as UHV / power Internet of things. The scale of UHV investment rose sharply from 112.8 billion yuan to 181.1 billion yuan, an increase of 60.6 percent. The company is the leader in the field of high and low voltage testing in China. According to our estimates, in 2017, the market share in the field of low voltage testing / high voltage testing in China was 14% and 24% respectively, ranking first in China. With the UHV restart this year, the company's related testing business is expected to fully benefit.
Slightly downgrade profit forecast to maintain "buy" rating
Taking into account the impact of COVID-19 's epidemic situation, we slightly downgrade the company's profit forecast. It is estimated that the return net profit in 2020-21 is 170000,000 yuan, corresponding to the 20-21 year EPS is 0.22pm 0.37 yuan (the previous value is 0.29pm 0.41 yuan). The introduction of 2022 return net profit forecast is 340 million, with reference to the comparable company's 20-year average PE 33x. Considering the outstanding scarcity of the company, it is expected to fully benefit from the increased investment in the national network in the future. Give a certain valuation premium, give 20 years 38-40x target PE, target price 8.49-8.94 yuan, maintain the "buy" rating.
Risk tip: revenue is lower than expected and profit margins are rising at a slower rate than expected.