Main points of investment
The company announced results for the first half of 2020: revenue rose 39.6% year-on-year to HK $402 million (the same unit below); gross profit increased by 85.1% to HK $112 million, gross profit margin increased by 6.9ppt to 27.9%; net profit of HK $10.58 million, compared with a loss of HK $13.11 million in the same period last year; basic profit per share is HK0.08 cents.
Our comments are as follows:
The assembly industry has an obvious off-peak season, and the company turned losses into profits in the first half of the year, reflecting the counter-trend rise of the assembly industry under the challenge of the epidemic, as well as the company's ability to reduce costs and increase efficiency. PC component manufacturing revenue of 352 million Hong Kong dollars, up 55.5% year-on-year, accounting for 87.4% of revenue. Production of PC components increased by 69.6 per cent to 124500 cubic meters, and capacity utilization increased by 13ppt to 39 per cent. The unit price of PC components dropped 8.3% to 2826 yuan per cubic meter compared with the same period last year. The group continues to strengthen cost management. PC costs have dropped by 7.0% compared with the same period last year, and some factories have dropped to less than 1700 yuan per cubic meter. The overall gross profit margin increased by 6.9ppt to 27.9%.
The scale effect is highlighted, and the expense rate has decreased during the period. The sales expense rate fell 0.1ppt to 7.7% year-on-year, the management expense rate decreased to 13.6% year-on-year, and the financial expense rate decreased 0.5ppt to 3.6% year-on-year.
The net profit margin was 2.6%, an increase in 7.2ppt compared with the same period last year.
The period of trade receivables has increased, and the cash flow of operating activities has been flat. The turnover days of trade receivables increased by 25 days to 296 days compared with last year, while the number of days of trade accounts payable turnover was the same as last year. The net cash flow from operating activities was 14.1 million yuan, unchanged from last year.
Company development strategy: 1) continue to accelerate the national industrial layout: focus on the development of Henan, Yangtze River Delta, Pearl River Delta and Guangdong-Hong Kong-Macau Greater Bay Area. 2) take EPMC and EM as the main mode: the company will gradually expand its business scope in the second half of the year, including construction, decoration and garden business. 3) strengthen the synergy with the major shareholder Jianye Group: explore the cooperation mode of "industry + real estate" inside and outside Henan Province.
Our point of view: the prefabricated construction industry ushered in explosive growth opportunities, PC entered the industrial harvest period, the company ranks first echelon in the country, it is recommended that investors pay attention.
Risk tips: policy promotion is not as expected, raw material prices fluctuate, and market demand is not as expected.