Xu Ji Electric (000400) 2019 Interim Report Review: Smart Grid Construction Favors Performance and DC Orders in Hand Are Sufficient

Xu Ji Electric (000400) 2019 Interim Report Review: Smart Grid Construction Favors Performance and DC Orders in Hand Are Sufficient
The company’s net profit attributable to its mother in the first half of the year1.740,000 yuan (ten years +31.48%), the smart grid supporting ubiquitous electric power IoT construction, which is good for equipment purchase demand, UHV DC orders in hand overlap, and subsequent projects are gradually clear, maintaining EPS forecast for 2019/2020/2021 0.64/0.78/0.73 yuan, given 20 times PE in 2019 as a reasonable estimate of the company, corresponding to a target price of 12.8 yuan / share, maintain “Buy” rating. Revenue grew steadily, and net profit margin increased significantly.The company achieved operating income of 30 in the first half of 2019.540,000 yuan (ten years +14.97%), net profit attributable to mother 1.740,000 yuan (ten years +31.48%), the company’s gross sales margin was 18.13% (one year-0.49 pcts), with an expense ratio of 14.10% (decade +0.85 pcts), with a net interest rate of 6.45% (decade +0.62 pcts), the company’s net profit has gradually repaired since its bottom in the 2018 annual report.In the first half of the year, due to the company’s impairment of bad debts, the asset impairment loss was -1.50,000 yuan (-0 in the same period last year.31 ‰). At the same time, due to the repayment of the company’s debt interest in the same period last year, the company’s financial expenses were reduced to 710,000 yuan.The report summarizes that the company’s sales in this period were better, and the net operating cash flow improved to -55.32 million yuan (+88 in total).57%). The main business sectors benefited from the construction of smart grids, and smart charging and replacement systems and smart meters have seen impressive growth.Among the six major business segments of the company’s products, the first four major business segments recorded net growth in the first half of the year, of which electric vehicle intelligent charging and replacement system revenue4.610,000 yuan (ten years +105.46%), smart meter business income4.1.6 billion (previously +武汉夜生活网39.11%). During the rapid expansion of budget business, the gross profit margin also has different levels of gradient.At the same time, the gross profit margins of the intelligent power distribution system and intelligent medium-voltage power supply equipment that have relatively stable growth rates have increased to 25, respectively.24% / 10.79%, ten years +1.71/4.83 points.The advancement of the ubiquitous electric power Internet of Things is gradually showing its role in supporting the construction of smart grids. With the promotion of various pilot projects that the company has begun to participate in this year (such as State Grid Beijing Huairou, Zhejiang Hangzhou and other multi-station integration demonstration projects, State GridAccelerating the construction of the side charging network), the future development space is expected to provide the company’s main business with continuous growth and provide long-term driving force. There are abundant orders for HVDC transmission, and the follow-on special direct projects are about to open.In the initial UHV procurement, the company won about 10 bids.USD 5.2 billion. The company has solid industry integration in the procurement of converter valves (about 30% of the market) and DC control and protection systems (about 50% of the market). This round of UHV construction is expected to invest about $ 4 billion in equipment orders.Early UHV DC orders are expected to confirm 90% of the revenue during the year, and the continuous DC business income of the base company.At the same time, in July 2019, the bidding for the Yazhong line started. According to the project bidding cycle, it is expected that the tender may be announced in early September. The company’s special new orders are on the horizon and gradually start to confirm some revenue during the year. It will focus on the company’s 2020 performance.The construction progress of two UHV DC projects in Baihetanzhou-Jiangsu and Baihetan-Zhejiang will benefit the company’s performance in the next 2-3 years. Risk factors: fluctuations in power grid investment, UHV approvals for construction progress are less than expected, distribution network transformation actions are less than expected, and market competition is intensified. Investment Advice.The company is the main supplier of smart grid construction and internal equipment of UHV DC core stations. The investment in the grid continues to focus on the smart grid. A new round of UHV order release cycle is coming. The “14th Five-Year Plan” reserve project has gradually appeared.The point of long-term growth is clear.Maintain the company’s 2019-2021 net profit forecast6.43/7.81/7.390,000 yuan, corresponding to EPS 0.64/0.78/0.73 yuan, corresponding to PE12 in 2019-2021.53x / 10.31x / 10.90x, giving the company 20x PE in 2019, maintaining a target price of 12.8 yuan / share, maintain “Buy” rating.