\u3000\u3 Jiangsu Eastern Shenghong Co.Ltd(000301) 129 Runa Smart Equipment Co.Ltd(301129) )
Q1 revenue grew rapidly, and the investment in heat supply network increased to accelerate the growth of profits. The company achieved a revenue of 31.38 million yuan in 2022q1, an increase of 46% at the same time. Q1 company overcame the impact of the epidemic in Shandong and other regions, promoted the accelerated implementation of orders on hand, and the overall revenue increased rapidly; The net profit attributable to the parent company was 10.68 million yuan, a significant increase of 103% year-on-year, mainly due to the receipt of 10.16 million yuan of government subsidies; Deduction of non performance is – 2.69 million yuan, compared with 3.43 million yuan in the same period last year. Q1 northern heating season is the off-season for the implementation of the company’s business, and the income accounts for a relatively low proportion in the whole year. However, the current rapid expansion of the company’s scale and the rapid growth of rigid costs affect Q1’s operating performance. At present, the downward pressure on China’s economy is increasing, and the steady growth of infrastructure construction continues to increase. Among them, the transformation and construction of urban pipe network is an important infrastructure project, and the relevant investment is expected to continue to increase, so as to accelerate the release of the demand for energy-saving transformation of heating pipe network. At present, the overall demand of the industry is good. If the subsequent epidemic situation in China is controlled, the company’s signing and project implementation are expected to be further accelerated, and the annual profit is expected to grow rapidly.
The profitability was basically stable, and the cash outflow increased due to the increase of raw material procurement. The gross profit margin of 2022q1 company is 56.2%, yoy-11.9 PCT, and the decline of gross profit margin is expected to be mainly due to: 1) the price of raw materials has increased; 2) The number of newly recruited employees of the company increased significantly year-on-year this year, and the gross profit margin decreased year-on-year due to the advance of personnel costs. During the period, the expense rate was 91.5%, yoy-5.3 PCT, of which the sales / management / R & D / Finance changed by – 0.7 / + 2.1 / – 5.8 / – 0.9 PCT respectively year-on-year. Q1 had less revenue and more rigid expenses, and the expense rate during the period was generally high (the expense rate in the whole year of last year was about 21%). The net interest rate attributable to the parent company is 34.0%, yoy + 9.5 PCT. The net outflow of Q1 operating cash flow was 72.51 million yuan, an increase of 12.02 million yuan over the same period last year, mainly due to the obvious increase in orders since this year, and the increase in procurement expenditure in order to lock in the cost of raw materials and prepare goods in advance. Cash to cash ratio 190%, yoy + 25 PCTs.
The policy promotes the strong demand of the industry and continues to undertake large orders. The rapid growth of the whole year can be expected. In February this year, the national development and Reform Commission and the National Energy Administration jointly issued the opinions on improving the institutional mechanisms and policies and measures for green and low-carbon energy transformation, emphasizing “promoting the reform of heating metering and the intelligent construction of heating facilities in areas with conditions”. Under the active promotion of the policy, the company has made excellent signing since this year. Recently, it has successively undertaken the AI intelligent heating project in Shizhong District of Zaozhuang thermal power corporation with a scale of 247 million yuan (which is also an important landing project of the company’s smart heating products), as well as the heating upgrading and reconstruction project in Zouping urban area of the pre bid winning standard, with a scale of 68 million yuan. The two projects totaled 315 million yuan, accounting for 59% of the company’s revenue last year. At present, the company has plenty of orders on hand (in Q1, due to the increase of contract funds received from customers in advance, the contract liabilities reached 91 million, an increase of 46% at the same time), and it has not yet reached the company’s annual centralized bidding period. There is still plenty of time to undertake and implement more orders during the year, and the annual orders and profits can grow rapidly.
Investment suggestion: we predict that the company’s net profit attributable to the parent company from 2022 to 2024 will be RMB 230 / 3.2 / 430 million respectively, with an increase of 36% / 36% / 35% (CAGR from 2021 to 2024 is 36%), EPS will be RMB 3.17/4.32/5.83 respectively, and the corresponding PE of the current stock price is 14 / 11 / 8 times, maintaining the “buy” rating.
Risk warning: product promotion is less than expected risk, technology development risk, new business and new market development are less than expected risk, etc.
