Wolong Electric Drive (600580) 2019 Third Quarterly Report Review-Performance Exceeds Expectation Product Structure Optimization Promotes Both Profit and Quality

Wolong Electric Drive (60058杭州桑拿 0) 2019 Third Quarterly Report Review-Performance Exceeds Expectation Product Structure Optimization Promotes Both Profit and Quality

The company’s 20193Q performance exceeded expectations, the product structure was optimized to improve gross profit, and the cost control during the period increased steadily and increased profits.

We believe that the company’s traditional motor business has consolidated its bottom line and the emerging EV motor business has contributed to high growth.

Considering that the improvement of the company’s profitability will boost performance, we raise the company’s EPS forecast for 2019-2021 to 0.

76/0.

78/0.

93 yuan (formerly 0.

67/0.

78/0.

93 yuan), corresponding to 11/11/9 times the PE, raise the target price to 12.

16 yuan, corresponding to 16 times the PE in 2019, the current value is still undervalued, maintain “Buy” rating.

The third-quarter performance in 2019 exceeded expectations, and revenue / deductions were not attributable to the mother92.

51/5.

4.7 billion (+12.

48% / + 24.

36%).

The company’s 2019 3Q revenue was 92.

51 ‰ (+12.

48%, the same below), net profit attributable to mother 8.

1.1 billion (+81.

94%), net of non-attributed net profit5.

4.7 billion (+24.

36%), exceeding market expectations.

Non-recurring profit or loss is the adjustment of accounting policies for 2019H1. Changes in the fair value of some financial assets are included in the current profit and loss.

5.5 billion.

Among them, the company’s 2019 Q3 revenue / net profit attributable to mothers / net profit attributable to non-mothers 32.

41/2.

01/1.

9.9 billion (+14.

13% / + 19.

11% / + 16.

59%), the net profit growth rate is higher than the revenue growth rate, profitability, and quality enhancement.

Gross profit margin continued to increase, and cost control was stable during the period.

Company 3Q 2019 gross profit margin 26.

65% (+1.

50pcts), the company’s R & D investment value is realized, the proportion of high value-added products such as BLDC motors has increased, and the main product structure has continued to optimize.

The cost rate during the period was 19.

48% (+1.

91 items), unchanged from 2019H1.The sales / management / financial expense ratios are 6 respectively.

51% / 11.

03% / 1.

93% (+0.

04 / + 0.

87 / + 0.

99pct).

Among them, the increase in the financial expense ratio was due to the increase in loans for the purchase of general low-voltage electrical assets and the decrease in exchange losses.

According to the company’s business plan, in the future, the company ‘s development momentum will be restructured, and the extension of M & A will be shifted to endogenous R & D. We expect the expense ratio to decline steadily during the period and increase profits.

The traditional motor business bottomed out, and the EV motor business brought high growth.

The company’s main business includes four major sectors of industrial high voltage / low voltage / micro special / EV motors, of which high voltage, low voltage and micro special motors are the company’s traditional motor products, accounting for about 95% of total revenue.

The company is a leader in the motor industry. According to his latest report, the company’s high-voltage / low-voltage motor revenue ranks 2nd / 3rd in the world; the quality of micro-motor customers is good for the concentration of the home appliance industry.

We expect the traditional motor business to increase steadily and slightly, which will lay a solid foundation for the company’s performance.

The company’s EV motor was awarded ZF 22.

Orders for fixed supply of 6 trillion-inch motors entered the Mercedes-Benz supply chain, and international competition was verified.

In the future, in the context of supplementary declines and the rapid release of new models from overseas auto giants, the new energy vehicle market is expected to shift to global competition.

We are optimistic that the company will continue to broaden its supporting scope with the brand effect and capture the prospect of high-quality long-term contracts. It is expected that by 2025, it will achieve a revenue scale of 3 billion to 4 billion and a CAGR of about 30% to 36%, achieving high growth.

Risk factors: Downstream prosperity is down, sales of new energy vehicles are lower than expected, and raw material prices of the company fluctuate.

无锡夜网 Investment suggestion: The company’s third-quarter performance in 2019 exceeded expectations, the product structure was optimized to increase gross profit, and the cost control during the period increased steadily and increased profits.

We believe that the company’s traditional motor business has consolidated its bottom line and the emerging EV motor business has contributed to high growth.

Considering that the improvement of the company’s profitability will boost performance, we raise the company’s EPS forecast for 2019-2021 to 0.

76/0.

78/0.

93 yuan (previous forecast was 0.

67/0.

78/0.

93 yuan), corresponding to 11/11/9 times the PE, raise the target price to 12.

16 yuan, corresponding to 16 times the PE in 2019, the current value is still undervalued, maintain “Buy” rating.