Chint Electric (601877) 2018 Annual Report & 2019 First Quarterly Report Comment: Performance Meets Expected Profitability Steady Increase

Chint Electric (601877) 2018 Annual Report & 2019 First Quarterly Report Comment: Performance Meets Expected Profitability Steady Increase

Core view The company’s 2018 revenue / attribution net profit increased by 17 respectively.

10% / 26.

47%, performance is in line with expectations.

Adjust 2019-2021 EPS forecast to 1.

94/2.

33/2.

72 yuan, corresponding to 14/12/10 times the PE, giving a target price of 34.

9 yuan (corresponding to 18 times PE in 2019), maintain “Buy” rating.

The annual report is in line with expectations, and the reduction in sales of power plants has resulted in a quarterly report on performance expectations.

The company’s 2018 revenue was 274.

21 trillion (ten years +17.

10%, the same below), net profit attributable to mother 35.

9.2 billion (+26.

47%), EPS is 1.

68 yuan, performance in line with expectations; gross / net margin 29.

67% / 13.

72% (+0.

35 / + 0.

93pct), the brand advantage of low-voltage electrical appliances promotes profitability; the expense ratio during the period is 15.

83% (+0.

21pct), where sales / management / financial expense ratio is 6.

36% / 8.

05% / 1.

42% (+0.

63 / + 0.

32 / -0.

74pct), stable cost control ability; cash flow from operating activities 29 ppm (+10.

47%) and a net profit cash ratio of 80.

7% (-9.

7pcts), the ability to collect money has improved.

2019Q1 company revenue 59.

9.5 billion (+17.

66%), net profit attributable to mother 5.

4.2 billion (-11.

60%), gross / net margin 26.

89% / 9.

54% (-0.

06 / -3.06pcts), the increase in performance was related to the additional recognition of approximately 200 million investment income from the sale of power plant projects in the same period last year.

Low-voltage appliances have grown steadily, and their competitive advantages have continued to strengthen.

The company’s low-voltage electrical equipment revenue was 172.

470,000 yuan (+17.

37%), of which overseas revenue was 19.

3.5 billion (+23.

21%), the proportion increased to 11.

50%, the gross profit margin of the plate is 33.

99% (+1.

51).

The company has established the most competitive dealer network. By the end of 2018, it has 16 offices, 500 core dealers, more than 3,600 distribution outlets, and coordinated deployment of online and offline platforms.

The company’s comprehensive marketing channels consolidate the development of distribution business, tap the potential of end customers, cultivate the industry market intensively, at the same time strengthen the direct sales model, expand the two network, China Mobile, Huawei, China Resources and other multi-industry industry customers to achieve a full value chain marketing model.

The company has accelerated its overseas layout, shifted from catching up to surpassing foreign brands, moving its products from a single component to integrated product solutions, accelerating the continuous update and transformation of Kunlun products, continuously improving its products, and enjoying increased dividends from industry concentration.

The photovoltaic sector has grown against the trend and its business structure has continued to optimize.

In 2018, the company’s photovoltaic segment revenue was 103.

7.5 billion (+17.

98%), gross margin of 24.

08% (-0.

89pct), the overall net profit of new energy.

4.3 billion (+48.

20%), of which each business accounted for 60% of component manufacturing.

27%, EPC 20.

87%, power plant operation 18.

86%, achieving a counter-trend growth after “531”.

The company increased the proportion of asset-light business and sales of components3.

1GW, of which overseas accounted for over 70%, EPC development volume was 661MW, and distributed development volume was 974MW, all hitting record highs.

At the same time, the company is actively optimizing the structure of the power station, which is in operation2.

22GW, the proportion of distributed generators increased to 48.

3%, the proportion of power stations in power-limiting areas decreased, and the ROE of power stations increased steadily.

In response to the distributed photovoltaic market, the company has developed 149 core dealers and expanded residential photovoltaic sales channels. In 2018, it completed more than 100,000 household photovoltaic installations and converted over 14重庆耍耍网0,000 households. It will continue to grow rapidly with strong policy support.

Risk factors: The photovoltaic development is less than expected, the demand for low-voltage electrical appliances is reduced, and the promotion of new products is less than expected.

Investment suggestion: Considering the improvement of the company’s inventory turnover, we slightly lower the EPS forecast for 2019-2021 to 1.

94/2.

33/2.

72 yuan (the original EPS forecast for 2019/2020 was 1.

98/2.

40 yuan), corresponding to PE 14/12/10 times, given a target price of 34.

9 yuan (corresponding to 18 times PE in 2019), maintain “Buy” rating.