Hongfa Shares (600885): Performance meets expected demand and stabilizes

Hongfa Shares (600885): Performance meets expected demand and stabilizes

Investment Highlights The company released its 2019 Interim Report: Realizing Operating Income34.

07 trillion, +1 a year.

53%; net profit attributable to mother 3.

55 trillion, EPS is 0.

48 yuan, at least -3.

43%; net profit deducted from non-attributed mother 3.

34 ‰, at least -2.

96%, in line with market expectations.

From the second quarter alone: operating income.

8.2 billion a year.

27%, +9 from the previous quarter.

66%; net profit attributable to mother 1.

970,000 yuan, at least -1.

60%, +25.

48%; net profit after deducting non-attribution is 1.

84 ‰, at least -0.

58%, +22.

67%.

The gross profit margin for the second quarter alone was 38.

55%, +0.

38 points; net interest rate 14.

85%, +1.

43 points.

  Power, high-voltage DC and industrial control relays continued to grow rapidly.

In the first half of 2019, the annual growth rate of power, high-voltage DC and industrial control relay shipments reached 23, respectively.

5% / 55.

0% / 23.

3%, maintaining a high growth momentum.

  Among them, power relays have benefited from the increase in bids for smart meters from the State Grid, and the recovery of the meter industry has been 杭州夜网 verified; overseas benchmark customers of high-voltage DC relays such as Mercedes-Benz, Volkswagen, and Porsche have begun to supply small quantities and continue to grow rapidly; industrial control relays are supplied to Siemens and SchneiderAnd other large customers, the product competitiveness has significantly improved, while actively expanding new growth points such as elevators, rail transit.

  Signal relays and low-voltage appliances grew steadily.

In the first half of 2019, the annual growth rates of signal relays and low-voltage electrical appliances reached 19, respectively.

0% / 15.

3%, stable growth rate.

Among them, the expansion of signal relays in the medical field has been significantly improved, and the demand for the Internet of Things, smart home, 5G and other fields has improved; low-voltage electrical appliances have developed smoothly in the field of complete sets of equipment and overseas power distribution.

  Power and automotive relays continue to adjust, waiting to reverse in the second half of the year.

In the first half of 2019, power and automotive relay shipments will be replaced7.

3% / 25.

0%.Among them, the main body of the power relay segment is intensifying competition in the domestic white goods market. The market has stabilized in the second quarter and is waiting for recovery in the second half of the year. The overall decline in the automotive relay replacement of the main domestic domestic automobile market has exceeded expectations.The company continued to increase the promotion efforts of new customers such as Mercedes-Benz and Bosch, and the decline was expected to narrow in the second half of the year.

  R & D sponsorships remained high and operating cash flow increased.

In the first half of 2019, sales / management (including R & D) / financial expenses were 1 respectively.

73/5.

10/0.

30 trillion, the cost of the period is 20.

93%, ten years +1.

20pct, keep relatively stable; R & D investment 1.

5.9 billion, accounting for 4.

67%, and the proportion of R & D expenses is expected to remain at about 5%; operating cash flow has increased significantly by 1157% to 8.

US $ 200 million due to increased collection discounts and restructuring returns.

  Investment suggestion: The company is a leader in the domestic relay industry, with obvious competitive advantages. The current recovery of the meter industry has been verified. Demand for the home appliance and automotive industries has changed in the second half of the year. At the same time, overseas benchmark customers for new energy vehicles have been successfully locked.Profits will reach 8 respectively.

31/9.

99/12.

1.3 billion, EPS is 1.

12/1.

34/1.

63 yuan, corresponding to the closing price of PE on July 30, 2019 were 22.

0/18.

3/15.

1x, maintaining the overweight rating.

  Risk warning: Macroeconomic growth is slower than expected, and capacity expansion progress is lower than expected