Event

The company's income in the first half of 2021 was 2.24 billion yuan, up 27% from the same period last year; net profit from home was 220 million yuan, up 30% from the same period last year; net profit from non-return was 190 million yuan, up 26% from the same period last year; weighted ROE was 7.1%, up 1.3 pct from the same period last year; and net operating cash flow was 76.54 million yuan, down 62% from the same period last year.

Main points of investment

The performance growth in the first half of the year is in line with expectations, and the number of orders exceeds 7.2 billion yuan. 1) the company's 2021H1 revenue and net profit grew steadily compared with the same period last year. The company's Q2 revenue was 1.36 billion, an increase of 10% over the same period last year, and the net profit of Q2 was 55% higher than that of Q1. The net profit of Q2 was basically the same as the same period last year and increased by 73% compared with Q1. The net operating cash flow decreased significantly compared with the same period last year, mainly affected by the increase in year-end bonus and bid deposit.

2) the company deeply tapped the potential of the internal circular economy, and the order volume of the rail transit project reached a new high, with a valid order of 7.29 billion yuan (excluding winning the bid but not yet receiving a deposit order of 714 million yuan), and the scheduled production order was full.

3) the company launched the system management reform project in the first half of the year, strengthened the top-level design, reshaped the company's cultural system, built a customer-centered scientific management, and started the transformation of the "second big venture".

Fluctuations in raw material prices led to an increase in operating costs, increasing the layout of R & D investment in the future. 1) the company's gross profit margin in the first half of 2021 was 28.2%, down 2.9 pct.year-on-year; operating cost was 1.59 billion yuan, up 31.5 pct.There was a year-on-year increase of 27.2% Q2 gross profit margin, down 5.5 pct., month-on-month 3.1pct. Rising raw material prices lead to higher operating costs, and gross profit margin fluctuates greatly in a single quarter, which is expected to stabilize in the second half of the year.

2) the company's sales expenses in the first half of 2021 were 210 million yuan, an increase of 5.3 pct over the same period last year; administrative expenses were 81.28 million yuan, an increase of 8.4 pct; and financial expenses were 5.96 million yuan, an increase of 85.3 pct over the same period last year, mainly due to the increase in bill discount interest in the first half of the year The R & D cost is 94.07 million yuan, an increase of 42.9 pct. over the same period last year. The continuous high R & D investment reflects the company's determination to create a full-scene passenger flow solution of "China Core and Kanglixin".

Actively give back to investors, strategic transformation layout of future new growth points the company actively rewards investors. In the first half of the year, the company implemented the annual rights and interests distribution plan for 2020, handing out 3 yuan in cash (including tax) to all shareholders for every 10 shares. A total cash dividend of 235.77 million yuan (including tax) was distributed.

Driven by multiple factors such as real estate, rail transit and the renovation of old houses, the number of orders held by the company has increased rapidly, while the investment in technology and product research and development has been increased around the main business, and the domestic market share continues to increase. After forming an integrated R & D-manufacturing-installation industry chain, the company has gradually transformed to manufacturing services, laying the foundation for greater market development and development in the future.

Profit forecast and valuation

The prosperity of the elevator industry is expected to continue in 2021, and the company's market share and profitability are expected to further improve. It is estimated that the company's net profit for 2021-2023 is 5.8x690 million yuan, a year-on-year increase of 20%, 18%, 14%, corresponding to an EPS of 0.73, 0.86, 0.99 yuan, and the corresponding pre-PE is 12-10-9 times, maintaining a "buy" rating.

Risk hint

Investment in real estate infrastructure is lower than expected; steel prices have risen sharply; elevator safety accidents; industry competition has deteriorated.