Shanghai Electric (601727): 2018 results are in line with expectations; pressure on gross profit margin but fan business is expected to grow
Performance review 2018 results are in line with expectations. Shanghai Electric announced 2018 results: operating income of 101.2 billion, an increase of 27%; net profit attributable to mothers, 3 billion, an increase of 13%.
Excluding one-off gains and losses such as government subsidies, the company’s core profit increased by 2% to 21 trillion per year, in line with expectations.
Development Trend Thermal power and environmental protection equipment will drive revenue growth in 2018.
The company’s operating income increased rapidly by 27%, mainly due to 1) the company expected to resume growth before coal power tightened, and thermal power equipment revenue increased by more than 48%; 2) environmental equipment revenue increased by more than 78%.
The overall gross profit margin is under pressure, but the gross profit margin of wind power equipment has increased.
In 2018, the company’s overall gross profit margin fell by 2 ppt to 20%, mainly because the gross profit margin of elevator business and generator EPC business dropped significantly.
However, while the company’s wind power equipment business reduced its revenue by 6%, its gross profit margin dropped significantly by 5ppt to 16%, mainly due to the increase in the proportion of high gross profit offshore wind turbine sales (the company’s offshore wind turbine gross margin in 2018 was 24%).
The expected revenue of wind power equipment in 2019 will increase both the gross profit and the development of nuclear power equipment.
The company’s wind turbine orders in hand reached 20.8 billion yuan in 2018, a year-on-year increase of 37%.
We expect the company’s wind turbine adjustment volume and revenue to increase significantly under the influence of the company’s reorganized order reserve and the rush to install wind power in 2019.
And scale effect is expected to pull the rules, which will further increase the gross profit margin.
Taking into account the national wind power installed capacity this year may reach 30GW and the company’s 5% market share, we raised the growth rate of wind turbine business in 2019 to 45% (corresponding to 1.
6GW), and raised the gross profit margin of the fan 3ppt to 18%.
In terms of nuclear power, considering the uncertainty in the growth rate of approval and development, we conservatively estimate that the company ‘s nuclear island revenue growth rate will be about 10% this year, and we look forward to positive policy support in the future.
In addition, the company stated that the preliminary problems in the research and development of nuclear power main pumps have been resolved, and it may be expected to expand its business in the future to increase its performance.
The profit forecast takes into account the pressure on elevator, power plant EPC and other businesses. We lower our 2019e EPS forecast by 5% to RMB0.
18 yuan at the same time?
The 2020e EPS forecast is RMB 0.
Estimates and recommendations A / H shares of Shanghai Electric Corporation currently have a total of 19 years.
7x P / E.
We maintain the company’s A / H shares as neutral and recommended grades. At the same time, due to adjustments in earnings forecasts, we have reduced the company’s A / H shares target price by 10% to RMB 7.
30 yuan / HKD 4.
05 yuan, corresponding to 19 years 41.
3 times P / E, compared with current 18% / 38% upside.
Risk projects were weaker than expected, financial costs rose, and gross profit margins fell.