The 1H20 performance is in line with our expectations
The company's 1H20 revenue was 406 million yuan, an increase of 7.71%, and Guimu's net profit was 32.347 million yuan, a decrease of 21.37%; of these, 2Q20 revenue was 340 million yuan, an increase of 90.7%, and Guimu's net profit was 56.6 million yuan, an increase of 90%.
At the same time, the company expects the net profit of the mother to increase by 60%-80% to 99.83 million yuan - 112 million yuan in the first to 3Q20; the corresponding 3Q20E net profit to the mother increased by 217%-276% to 67.48 million yuan to 79.96 million yuan.
Benefiting from the high growth of the communication base station power supply and data center IDC power supply business, the company's 2Q20 performance improved significantly from month to month, and expects high growth in 3Q20. The performance is in line with our expectations.
Development trends
All businesses increased year-on-year in 1H20, and operations recovered significantly in 2Q20. The company's 1Q20 revenue fell 67%. The impact of the pandemic was significant, but the overall performance of various business requirements was delayed rather than cancelled. 2Q20 revenue increased 91%, all 1H20 sub-businesses experienced year-on-year growth, and operating performance picked up.
New orders for the power electronics business were plentiful, delivery expectations boosted 3Q20 performance expectations, and 2H20 was expected to add momentum to the software business. The company's power electronics business (including traditional communication power supplies, HVDC power supplies, charging piles, etc.) added 760 million yuan to 1H20 contracts, an increase of 92.3%; of these, communication power supplies increased 166 million yuan, an increase of 164%, and data center HVDC increased 330 million yuan, an increase of 350%. Looking at the industry level, the domestic 5G base station and data center construction boom is driving demand for communication power supplies and IDC power supplies. Technology is leading at the company level. The national standard for 240V/336V DC power supply systems for communications drafted at the head of the 5G field has been released. At the same time, “Panama” power system products have been successfully developed, integrating 10KV power distribution, transformers, and HVDC, leading advanced HVDC power products in the IDC field. Under the high contract amount, we expect the company's 2H20 delivery boom to continue, driving continued performance.
Joining hands with the Ningde era to enter the two-wheel electric vehicle power exchange market is expected to open up new growth space.
The company invested 200 million yuan in strategic investment in Ningde Smart and obtained priority purchasing rights for smart switchboard products from Ningde Smart. Ningde Smart Shopping is a joint venture between Hello Travel, Ningde Times, and Ant Financial. It will mainly lay out the two-wheel lithium electric moped market. The company expects to begin delivery of switchboards within the year, and we expect this business to become a new growth point in 2021.
Profit forecasting and valuation
We maintain our 2020/2021-e profit forecast of 193/252 million yuan. Considering that the company's new orders are abundant, the certainty of the year-on-year increase in performance is strengthened, and the valuation center is rising under the overall boom in the 5G base station and data center industry, we raised the company's target price by 30.4% to 18 yuan. The current stock price and target price correspond to 2020/2021 e 44.1/33.8x P/E and 53/40x P/E respectively. There is 19.2% upward space to maintain outperforming industry ratings.
risks
The company's power electronics business orders fell short of expectations, and product price reductions exceeded expectations under industry competition.