I. Overview of events
On April 12, the company released its annual report, with operating income of 1.562 billion yuan in 2020, an increase of 34.73 percent over the same period last year, net profit of 213 million yuan, an increase of 47.05 percent, and net profit of 199 million yuan, an increase of 108.88 percent over the same period last year.
II. Analysis and judgment
Focus on the main business, divest the non-core business, return the performance to the fast growth track, continue to firmly promote the development strategy of "focus on the main business, advance and retreat", concentrate superior resources, focus on the development of power transmission and transformation equipment and power engineering design services, speed up the divestiture of non-main business, and have completed the equity transfer of Changgao Real Estate Company and Changgao Comprehensive Energy Service Company. After a sharp decline in revenue and net profit in 2018, revenue and net profit have returned to the growth track and reached another all-time high; gross profit margin was 34.93%, down 0.33% from the same period last year, and remained at an all-time high.
The performance of power transmission and transformation equipment plate has reached a record high, and it is expected to fully benefit from UHV and smart grid construction to successfully complete the delivery of products from Qinghai-Henan, Shaanxi-Wuhan and other key UHVDC projects, and won the bid Baihetan ~ Jiangsu plus or minus 800 kV UHVDC project. Changgao Electric has participated in many key projects such as the Zhangjiakou Olympic Project in northern Hebei and the national key poverty alleviation project of "three districts and two prefectures". To meet the market demand, the company has developed a number of products, such as one-button sequence-controlled isolation switch, primary and secondary fusion column circuit breaker, intelligent switchgear cabinet, environment-friendly gas insulated 10KV ring network cabinet and so on. In addition, 110KV Hengyang Lion Rock Intelligent Power Station, one of the first national intelligent substation transformation projects contracted by the company, was officially put into operation, indicating that the company has the ability to bid for the whole station. The business income of the power transmission and transformation equipment sector reached 1.311 billion yuan, an increase of 44.44% over the same period last year, accounting for 83.93% of the total income, an increase of 5.64% over the same period last year. Among them, the net profit of Changgao switch increased by 46.44% over the same period last year, the net profit of Changgao Electric increased by 129.45%, the net profit of Changgao complete set increased by 412.73% over the same period last year, and the net profit of Changgao Senyuan increased by 76.37% over the same period last year. Looking forward to 2021, the central government first proposes to build a new power system with new energy as the main body, and the construction of UHV and smart grid is accelerated, and the company's equipment sector is expected to fully benefit. As the company further consolidate the national network market, and strengthen the southern network market development efforts, continue to do deep through the secondary and tertiary market, the performance is expected to maintain a high growth rate.
Affected by the epidemic, the power engineering sector has declined compared with the same period last year. This year, Huawang Electric Power, a subsidiary, is expected to stabilize and strengthen its integration with the group, making breakthroughs in important markets such as Jiangsu and Henan, with a year-on-year increase in total orders of 50.79%. And is expected to further cover Sichuan, Jiangxi, Shaanxi and other markets. Chunhua Zhongluo 80MW wind power project with long and high new energy construction realized full capacity grid connection last year, and signed the equity transfer agreement of Chunhua Zhonglue 80MW wind power project and Shenmu smooth 40MW photovoltaic project in March 2021. Due to the impact of the epidemic, Huagang Power lost 99000 yuan in 2020, while Changgao New Energy Power lost 2.651 million yuan because the project has not yet been settled. It is expected that the performance of the power engineering sector is expected to stabilize and pick up this year.
During the period, the expense rate decreased significantly, and the cash flow of operating activities increased significantly. During the period, the expense rate decreased by 7.13% to 16.92% compared with the same period last year. Among them, the sales expense rate decreased by 3.39% compared with the same period last year, the management expense rate decreased by 3.41%, the R & D expense rate decreased by 0.57%, and the financial expense rate increased by 0.25% compared with the same period last year. The net cash flow from operating activities was 206 million, an increase of 425.70% over the same period last year.
III. Investment suggestions
It is estimated that the return net profit of the company from 2021 to 2023 is 2.70,3.52 and 449 million yuan respectively, an increase of 27%, 30% and 28% compared with the same period last year. The corresponding valuation is 11, 8 and 7 times PE, with reference to 25 times valuation of Shenwan high voltage equipment plate. Taking into account the long-term growth space of the company, it is covered for the first time and given a "recommended" rating.
Fourth, risk tips:
The scale of power grid investment is not as expected, the price of raw materials is rising, the market competition is intensified, and the construction progress of fund-raising projects is not as expected.