Core viewpoints

In the third quarter, the operating income was 763 million yuan, an increase of 107.79% over the same period last year, and the net profit belonging to shareholders of listed companies was 102 million yuan, an increase of 340.99% over the same period last year. In the third quarter, the company achieved operating income of 363 million yuan, an increase of 176.55% over the same period last year, and a net profit of 68 million yuan, an increase of 679.61% over the same period last year. The single-quarter gross profit margin was 39.53%, down 6.28% from 45.81% in the second quarter, and the net profit rate was 18.72%, an increase of 2.47% over 16.25% in the second quarter. The balance of 721 million yuan at the end of the period of the company's accounts receivable increased by 117.88% over the balance of 331 million yuan at the beginning of the year, mainly due to the increase in sales revenue. The balance of 572 million yuan at the end of the period of notes payable and accounts payable increased by 120.74% over the balance of 259 million yuan at the beginning of the year, mainly due to the increase in the procurement of raw materials. The net cash flow generated by operating activities increased by 211.29% from-7.34 million yuan in the same period last year to 81.6612 million yuan in the current period, mainly due to the increase in sales receipts. The R & D expenditure of 35.0921 million yuan in the third quarter was 100.56% higher than that of 17.4969 million yuan in the same period last year.

Look after the winding machine equipment, the dirty demand is strong: the company's main products include CNC automatic winding machine standard machine, non-standard machine and CNC automation special equipment. According to the 2018 mid-term report, CNC winding equipment business accounted for 43.97% of the main revenue. The company's main products have become the mainstream products in the field of electronic coil production equipment manufacturing. With the rise of wireless charging technology and the mass production of wireless charging coil winding equipment, the winding machine equipment business has gradually penetrated into a wide range of application fields. At present, it has been widely used in the smartphone market, and it is expected to transfer to other consumer mobile electronic products, cars, furniture and medical devices in the future. With the deep accumulation in the field of CNC winding equipment, after nearly a year of research and development, the company has made a series of technical breakthroughs in hollow solenoid production equipment, which can realize synchronous operation at multi-station. It has established the market position of a new generation of wireless charging coil production equipment for mobile phones. At present, no matter the wireless charging receiver and transmitter coil winding equipment of mobile phones, the company has achieved high customer satisfaction, and the transmitter coil winding equipment has achieved small batch sales in 2017. The main mass production in the first half of 2018 is the wireless charging equipment at the receiving end, with 365 units delivered and 90 units checked and accepted as of June 30.

Ocean Xiangrui continues to make efforts, and the volume of fine carving machine is just around the corner: the company controls Cosco Xiangrui, with a shareholding ratio of 55%. The company's current general manager Gong Lunyong (former chairman of Cosco) holds 31.79% of the shares and is the second shareholder of Cosco Xiangrui. Ocean Xiangrui's main product is precision carving machine, which belongs to the category of high-grade CNC machine tool industry supported by the state. At present, Cosco Xiangrui has successfully developed various types and types of precision carving machines, hot bending machines, engraving and milling machines, drilling and tapping machines, graphite machines and other matching automation equipment. According to the 2018 mid-term report, the fine carving machine equipment business accounted for 51.47% of the parent company's main revenue. The spare parts produced by the main customers of COSCO Xiangrui using the equipment they provide are used in wireless communication products and mobile terminal products of well-known brands at home and abroad (Huawei, Samsung, Lenovo, XIAOMI, etc.). Cosco's technical strength is concentrated in: intelligent NC numerical control technology, high-speed and high-precision precision carving technology, intelligent automation, precision forming technology and other fields. In terms of product hardware, the key dimensional tolerances are controlled within 0.01mm; in terms of product software, the "Ocean Xiangrui CNC system", which is independently developed and has been copyrighted by computer software, is adopted, which integrates machine tool multi-axis machining and automatic control technology, so that machine tool products and manipulators can be taken and placed automatically and seamlessly. The processing accuracy, stability, processing yield and new product competitiveness of ocean Xiangrui products have reached the advanced level of the industry. In the aspect of new product development, the glass hot bending equipment adopts unique temperature control mode, intelligent control mode and the cooperation of high precision parts to ensure the stable quality rate of the equipment. In 2018, the major mobile phone manufacturers have launched 2.5D and 3D glass mobile phones, increasing the demand of upstream manufacturers for precision engraving machines and hot benders, and the demand for ocean Xiangrui production of precision engraving machines and hot benders has increased.

Investment suggestion: we predict that the EPS of the company from 2018 to 2020 is 1.05,1.42 and 1.67 yuan respectively, and the corresponding PE is 21 times, 16 times and 13 times respectively. Maintain the recommended rating.

Risk hints: intensified market competition; bad debt risk of accounts receivable; risk of goodwill impairment.