2018 performance is in line with forecast
Zhangyuan Tungsten Industry announced its 2018 results: operating income was 1.87 billion yuan, an increase of 2.1% over the same period last year, and net profit per share was 46.28 million yuan, an increase of 47% over the same period last year. Net profit per share was 26.21 million yuan, an increase of 8% over the same period last year, mainly benefiting from a year-on-year increase in tungsten price and a decrease in asset impairment. In 2018, the company plans to pay a dividend of 0.02 yuan per share, with a dividend rate of about 40%. 4Q18's revenue was 480 million yuan, up 16% from the same period last year, 9% from the previous month, and its net profit was 18.51 million yuan, up 52% from the same period last year. The profit improvement was mainly due to the decrease in asset impairment compared with the same period last year.
Comments: 1) benefit from the rise in prices. 2018 domestic tungsten concentrate / APT price year-on-year + 17% 0.5ppt 20% to 107000 yuan / 168,000 yuan / ton, company gross profit margin (excluding business tax and additional) year-on-year + 0.5ppt to 18.3%. The average price of 4Q18 domestic tungsten concentrate is 100,000 yuan / ton, compared with the same period of last year-7% / month-on-month-2% mark apt-158,000 yuan / ton, year-on-year-5% / month-on-month-5%. 2) production and sales volume decreased compared with the same period last year. In 2018, the company's total metal plate production was 9567 tons, down 23% from a year earlier, and sales were 9133 tons, down slightly 2.6% from a year earlier. 3) the impairment loss of assets in 2018 decreased by 48.5% to 39.33 million yuan compared with the same period last year, mainly due to the decrease in the impairment of inventory and fixed assets compared with the same period last year. 4) the financial expenses in 2018 increased by 25.5% compared with the same period last year, mainly due to the increase in interest expenses, and the financial expense rate in 2018 was + 0.7ppt to 4.0% compared with the same period last year. 5) the cash flow of business activities in 2018 is + 400 million yuan to 210 million yuan compared with the same period last year. 6) the net profit of Ganzhou Aoketai in 2018 is-130 million yuan, and the loss is 16.06 million yuan lower than the same period last year.
Trend of development
The price of tungsten has support. Year-to-date domestic tungsten concentrate and APT prices fell slightly. Recent economic data continue to exceed expectations, and manufacturing is expected to improve, which will be good for tungsten demand and prices.
The company plans to generate 2 billion yuan in revenue in 2019, an increase of 7% over the same period last year. In 2018, the company launched the project of intelligent manufacturing technology transformation of high-performance tungsten powder (Phase II). The company expects to increase the production capacity of tungsten powder by 7000 tons / year and tungsten carbide powder by 4600 tons / year.
Profit forecast
Based on price and other hypothetical changes, we will increase our profit forecast for 2019 by 41% to 0.04 yuan / 0.04 yuan.
Valuation and suggestion
The company's share price remains neutral, raising its target price by 27% from 5.5 yuan to 7 yuan, and 3.2 times 1920-year 3.2-fold Pmax B, compared with the current share price, which is 2% higher than the current share price.
Risk
Demand fell short of expectations; tungsten prices fell more than expected.