2019 performance is in line with market expectations
Sanchuan Wisdom announced its 2019 results: operating income was 988 million yuan, an increase of 43.7% over the same period last year; net profit belonging to the parent company was 191 million yuan, an increase of 95.7% over the same period last year, corresponding to 0.18 yuan per share, in line with market expectations. In a single quarter, 4Q19's revenue was 402 million yuan, an increase of 110.8% over the same period last year, and its net profit was 73 million yuan, an increase of 389.6% over the same period last year.
Smart meter sales accelerate growth, completing the smart transformation. In 2019, the company's smart meter revenue was 600 million yuan, an increase of 91.0% over the same period last year, an increase of 65.7ppt over the same period in 2018, accounting for 61% of the revenue. At the same time, the gross profit margin of the smart meter business was 43.4%, an increase of 2.6ppt over the previous year. The income of mechanical water meters in 2019 was 2.72 billion yuan, basically the same as last year, accounting for 28% of the income, and the gross profit margin decreased by 1.2ppt to 25.1% compared with the same period last year. In 2019, the company's comprehensive gross profit margin was 37.6%, an increase in 3.7ppt compared with the same period last year.
During the period, the expense rate decreased slightly and the cash inflow from operating activities decreased. In 2019, the company's overall expense rate for the period was 20.2%, down 0.6ppt from the same period last year, and the net profit margin was 19.4%, which increased 5.1ppt over the same period last year. The net cash inflow from the company's operating activities in 2019 was 16.03 million yuan, down 56.1 percent from the same period last year, and significantly less than the annual net profit level, mainly due to the increase in the proportion of income from smart meters with longer account periods and the accelerated growth of 2H19, and the company's accounts receivable totaled 500 million yuan, an increase of 1.5 yuan and 190 million yuan respectively compared with the beginning of the year and the middle of the year.
Trend of development
The impact of the epidemic on the company's 1Q20 performance is relatively small. The company issued a forecast for the first quarter of 2020. It is estimated that the net profit of 1Q20 will be 19.068 million yuan to 21.186 million yuan, down 0% to 10% compared with the same period last year. If the company's anti-epidemic donation of 3.35 million yuan and other non-recurrent losses of 700000 yuan are excluded, we estimate that the company's operating profit will increase slightly in the first quarter.
The transformation of intelligent water affairs strategy has been successful, and the demand has been improving for a long time. The promotion of the company's NB-IoT smart meter is smooth. Through entering the mainstream first-tier cities such as Beijing, Shanghai, Tianjin, Shenzhen, etc., the company has achieved commercial use of the order of ten thousand at the earliest in the country, and the proportion of revenue also exceeds 60%. With the construction of the national smart city, the intelligence and information upgrading of water meters has become an important link. We believe that the company's intelligent water business is expected to achieve better development than the industry by virtue of the first-mover advantage.
Profit forecast and valuation
Due to the accelerated increase in smart meter penetration, we raised our profit forecast for 2020 by 34.3% to 228 million yuan, and introduced a net profit forecast of 273 million yuan in 2021, corresponding to a year-on-year increase of 19.5%. The current share price of the company corresponds to 22.0 amp 18.4 times 2020max 2021e Pdebase E. We keep the company's target price unchanged at 5.40 yuan and correspond to the 2020Mab 21e's 25xPamp E, which is 11.8% higher than the current stock price and maintains the "outperform industry" rating.
Risk.
The progress of the promotion of smart meters has slowed down and competition in the industry has intensified.