Hongfa Co. (600885): Revenue and gross margin continue to rise and exchange rate changes affect profit performance in line with expectations

Hongfa Co. (600885): Revenue and gross margin continue to rise and exchange rate changes affect profit performance in line with expectations

The 1-3Q19 performance was in line with our expected company’s 1-3Q19 revenue of 51.

5 trillion, increase by 1.

9%, net profit 5.

5.6 billion, down 5.

5%, deducting non-net profit 5.

26 trillion, down 4.

9%; 3Q19 revenue was 17.

4 trillion, the same increase of 2.

5%, net profit 2 trillion, down 9.

1%, deducting non-net profit 1.

9.2 billion, down 8%.

Performance is in line with our expectations.

High-growth businesses promoted gradual increase in revenue growth and gross profit margin, and exchange rate changes dragged down performance.

From the perspective of business structure, we believe that the relatively high gross profit margins of new energy vehicle high-voltage DC relays and smart meter power relays benefit from the rapid growth of global demand and structural strength, while traditional automobiles and general-purpose relays are still affected by the macro car market and lowThe impact of manufacturing prosperity has declined slightly in ten years.

The proportion of high-growth business revenue increased, and the momentum was strong, driving the overall revenue to increase by 3Q192.

5%, gross profit margin (excluding taxes and surcharges) reached 41%, which has been improved in the previous 2Q19.

Does the company have 3?
40% of revenue is overseas sales, so due to exchange rate changes, 3Q19 lost 0.

500 million, dragging down the final profit performance.

Cash flow continued to be strong and expense ratios remained stable.

Operating cash flow in the third quarter of 19 reached 7.

300 million, an increase of 110%, the total of 1-3Q reached 15.

52 trillion, an increase of 472%, is 2 of 1-3Q19 net profit.

8 times.

In the third quarter of 19, the company’s payables increased by nearly 3 from the previous month.

100 million, the total amount of invoices receivable remained stable, and the bargaining and payment management of the industry chain continued to strengthen.

Expense rate increased by 0 in 3Q19.

6ppt, stable.

Development trend The bidding cycle of smart meters is on the rise, and the European market for new energy vehicles 四川耍耍网 is booming. We are optimistic that the company’s power relays and high-voltage DC relays will continue to grow rapidly.

A total of 73.8 million domestic smart meters were tendered in the first three quarters of 19, with an annual increase of 39.


Since 2018, the domestic smart meter replacement cycle has started. Corresponding to the replacement of the bidding volume in 2011-2014, we believe that the high growth of this round of meter bidding will remain until 2021-2022.

In terms of new energy vehicles, the domestic growth rate in 3Q19, but the European market increased by 41%, and the overseas market has entered a period of rapid growth.

The company accounts for more than 40% of domestic high-voltage DC relays. At the same time, it has entered overseas first-tier car companies such as Volkswagen, Tesla, and sustained 南宁桑拿 high growth.

We estimate that this scale of business currently accounts for about 30% of the company’s revenue and is expected to maintain a high growth rate of 20-40%. Under the pressure of the macro environment of the traditional business, the growth change will bring continuous growth.

Earnings forecasts and estimates We maintain the company 2019 / 2020e 7.


81 trillion net profit is expected to maintain a target price of 30 yuan, the current expectation and target price correspond to 2019 / 2020e 25/21 respectively.
5x and 30 / 25xP / E, there are 18.
2% upside, currently estimated to be at the bottom of the estimated range since 2016. I am optimistic about the company’s high growth in emerging businesses and the gradual transformation of the macro environment into better traditional businesses to further stabilize and maintain an outperform rating.

Risks The macro environment has further weakened, and the growth of new energy vehicles has fallen short of expectations.