Hangcha Group (603298): Steady growth and waiting for demand to stabilize

Investment Highlights Performance Summary: The company released its semi-annual report for 2019 and achieved revenue of 46.

100 million (+6.

3%), achieving a net profit attributable to shareholders of the listed company of 3.

500 million (+10.

4%), deducting non-net profit is 2.

900 million (+6.

1%).

Among them, Q2 achieved revenue of 2.4 billion (-3.

6%), net profit attributable to the mother is 20,000 yuan (+4.

2%), deducting non-net profit 1.

600 million (+1.

1%).

The industry has entered an adjustment period and the company’s performance is better than the industry: According to the statistics of the Industrial Vehicle Branch of the China Construction Machinery Association, the total sales volume (including exports) of the entire industry in the first half of 2019 was about 30.

70,000 units (-0.

3%), of which Q1 sales were 15.

30,000 units (+11.

3%), Q2 sales of 15.

40,000 units (-9.

7%), indicating that the industry’s demand in the second quarter was sluggish.

Against the background of the negative growth of the H1 industry in 2019, the company still maintained positive revenue growth and a series of industry performances.

In Q2 2019, the company’s revenue increased slightly, which was also better than the industry’s nearly 10% floating level.

Gross margin increased slightly, operating cash flow was better: The company achieved gross margin of 20 in 2019H1.

9% (+0.

4pp), it is expected that the cost of beneficiary raw materials will decrease and the company’s operating efficiency will increase.

Expenses for 2019H111.

9% (+0.

3pp), of which selling expenses cost 5.

4% (-0.

1pp), the management expense ratio (including research and development) is 6.

6% (+0.

4pp), financial expenses expense-0.

1% (-0.

01pp), the management expense ratio (including 深圳桑拿网 research and development) rose, mainly due to the company’s 2019H1 research and development expenses reached 1.

80,000 yuan (+ 25%), after excluding R & D expenses, the management cost is 1.

30,000 yuan (+0.

2%), slower than revenue growth.

The company’s net cash flow from operating activities in 2019H1 was 4.

600 million (+62.1%), mainly due to the increase in cash received by the company’s sales of goods, and strictly controlled by the purchase and procurement expenses.

We believe that as a leader in the industry, the company’s operating efficiency has continued to improve, research and development has been continuously strengthened, and the strong is always strong.

Profit forecast and investment suggestions: It is expected that the company’s net profit attributable to its parent in 2019-2021 will be 6 respectively.

01/6.

69/7.

6.1 billion yuan, corresponding to 0 EPS.

97/1.

08/1.

23 yuan, corresponding PE estimates are 12/11/9 times, maintaining the “overweight” level.

Risk warning: downstream demand is less than expected risk; profitability is less than expected risk.