Event
The company's 3Q2019 operating income was 3.636 billion yuan, an increase of 8.26% over the same period last year; the net profit was 161 million yuan, an increase of 46.90% over the same period last year, and 132 million yuan was deducted from non-net profit, an increase of 50.65% over the same period last year. The company's performance is basically in line with expectations.
Business analysis
Adhere to the high-quality line and actively open up the market, and the company's gross profit margin will be further improved: the company will adhere to the differentiation and boutique strategy, grasp the middle and high-end market, and achieve differentiation in R & D, manufacturing, process control and other links. We will vigorously promote new green pipe products with high profit margins, and achieve personalization in marketing services, distribution system and coordination. During this period, sales expenses have increased by 45%. Fully contribute to the substantial growth of operating income and return net profit. At the same time, internal unremitting efforts to tap potential and increase efficiency, product profitability continues to improve, gross profit margin has increased steadily since 2017, 3Q2019 gross profit margin reached 14.61%, operating income increased by 8.26%, operating profit increased by 17.06%.
Optimize the asset structure, Lingtu equity transfer contributed considerable investment income: the company's associated enterprise Lingtu Software lost 8.7807 million yuan in the same period last year. During the reporting period, the company promptly adjusted its development strategy and continuously optimized its asset structure. The 36% Lingtu software equity held was transferred to Tiangao Yundan at a price of 67.7 million yuan, and 10% equity was transferred to Sky Blue at a price of 18.81 million yuan, resulting in a total transfer gain of 24.8 million yuan.
The National Pipe Network Company is about to be listed, and it is expected to release greater pipe demand: in the case that the National Oil and Gas Pipe Network Company has not yet been established, 2019H1's straight submerged arc welded pipe and high-frequency straight welded pipe products have achieved revenue growth of 84.14% and 39.20% respectively. The National Oil and Gas Pipeline Network Company, originally scheduled to be established in May this year, is expected to be officially listed soon. After the establishment of the National Pipe Network Company, one of the important tasks is to vigorously promote the pipeline construction plan in accordance with the government goals, improve the speed of pipe network construction, and alleviate the problem of lagging pipe network construction in our country. We estimate that by 2025, the investment in natural gas pipelines will be nearly trillion yuan, which will lead to nearly 500 billion yuan in related pipe investment. After the operation system of the pipe network company is clear, it will bring a large number of order demand, and it is expected that the company will usher in a larger market space and better development opportunities in 2020.
Investment suggestion
It is estimated that the company's operating income from 2019 to 2021 will be 5.85 billion yuan, 7.07 billion yuan and 8.38 billion yuan, and the corresponding net profit will be 250 million yuan, 367 million yuan and 473 million yuan respectively, corresponding to EPS 0.48,0.71 and 0.91 respectively, and the corresponding PE will be times that of 14-10-8, with a "buy" rating.
Risk hint
The speed of pipeline construction is not up to expectations, the gross profit margin of the industry is down due to low-price competition, and the progress of the project is not up to expectations.