In 2019, revenue increased 4.7% year on year, return net profit decreased 10.5% year on year, performance was lower than expected on March 26, the company released 2019 annual report: 1) operating income increased 4.67% to 16.368 billion yuan, return net profit decreased 10.48% to 455 million yuan, deducted non-net profit decreased 8.99% to 435 million yuan 2) the performance is 7.7% lower than expected (our profit forecast is 493 million yuan). The decline in performance is mainly due to: 1) the freight of Sha-Ba line is floating and reducing fees for customers; 2) the profit contribution of the supply chain is declining. We forecast that the EPS in 2020-2022 will be 0.36,0.38,0.42 yuan, and adjust the target price to 5.70-6.05 yuan, maintaining the "overweight" rating.
The special box business maintained high growth, the real estate delivery scale remained stable in 2019, and the company's gross profit increased by 5.54 million yuan, or 0.56%, compared with the same period last year. Benefiting from the growth of demand and the release of production capacity, the special box business has achieved remarkable results. In 2019, the company completed container shipments of 158.85 TEU, an increase of 22.00% over the same period last year. The increase in traffic volume led to an improvement in profitability, with the business achieving a gross profit of 317 million yuan (31.71% of the total gross profit), an increase of 14.99% over the same period last year. The scale of real estate delivery remained stable, with a gross profit of 70 million yuan (7.01% of the total gross profit), an increase of 5.20% over the same period last year.
The fee reduction of Sha-Ba line and the supply chain business are a small drag on performance.
In 2019, the arrival and delivery volume of Sha-Shan Railway completed 55.79 million tons, an increase of 2.55% over the same period last year. However, due to the impact of falling freight rates and reducing fees for customers, its railway freight and port logistics business achieved a gross profit of 370 million yuan (36.94% of the total gross profit), a decrease of 16.48% compared with the same period last year. The gross profit of the steel supply chain business was 222 million yuan (22.23% of the total gross profit), an increase of 32.32% over the same period last year. However, considering the increase of 71 million yuan in the cost of sales, we estimate that the contribution of the business's pre-tax profit decreased by 16 million yuan.
The epidemic has both advantages and disadvantages to various businesses. It has long been optimistic that railway freight transport has maintained a good growth trend since the outbreak of the COVID-19 epidemic on the railway multimodal transport track. According to the China Business report, in February, the country's railway freight volume increased by 4.5% compared with the same period last year, of which railway container traffic increased by 39.5%.
We are optimistic about the railway multimodal transport track and the long-term growth potential of the company's special box business. According to the Railway Freight Transport Increment Action Plan for 2018-2020, the average annual growth rate of China Railway container transport volume is 20%, of which container multimodal transport strives to grow by more than 30% a year. In addition, the COVID-19 epidemic has had an impact on the demand for commodities such as coal and iron ore, or has a negative impact on the company's transport volume of the Sha-Ba line and the volume and price of the steel supply chain.
Adjust the target price to 5.70-6.05 yuan, maintain the "increase" rating companies in the future include: 1) special box business expansion; 2) railway freight volume growth; 3) railway reform. Considering the impact of COVID-19 's epidemic situation, we adjusted the forecast of return net profit in 2020 / 2021 to 4.65\ 497 million yuan (the previous 5.57\ 632 million yuan), and introduced the forecast of 550 million yuan in 2022.
Considering that the average 2020PE of comparable companies is 16.5x, based on 16-17x 2020PE (the previous 19-20x 2019PE) and 2020E EPS 0.356 yuan, we lower the target price to 5.70-6.05 yuan (the previous price is 7.20-7.50 yuan). Maintain the "overweight" rating.
Risk hints: the development of special boxes is not as expected, the impact of the epidemic is higher than expected, and the progress of railway reform is slow.