China Tonghao (688009): Steady growth in line with expectations

Investment Highlights Performance Summary: The company released its semi-annual report for 2019 and achieved revenue of 205.

100 million (+8.

5%), net profit attributable to mother 22四川耍耍网.

700 million (+14.

3%), deducting non-net profit 20.

600 million (+ 7%).

The company’s July performance forecast shows that it expects net profit attributable to mothers to be 21 in 2019H1.

1?
twenty two.

800 million, net profit after deducting non-attribution to 20.

6?
twenty two.

500 million, semi-annual results in line with expectations.

  Rail transit business develops better and profitability improves.

The company’s 2019H1 rail transit control system business revenue was 153.

200 million (+15.

8%), with a gross margin of 27% (+1).

2pp), the general contracting business revenue was 51.

600 million (-8.

7%), with a gross profit margin of 12.

3% (-0.

8pp), showing that the better development of rail transit business fully guarantees the company’s overall revenue to grow steadily.

The company’s overall gross profit margin for 2019H1 is 23.

3% (+1.

3pp), the increase in profitability is mainly due to the rapid growth of rail transit business with higher gross profit margin.

The company’s expenses during the 2019H1 period9.

9% (+1.

2pp), of which selling expenses are 1.

8% (+0.

7pp), administrative expenses5.

3% (+0.

3pp, excluding R & D), R & D expenses2.

8% (-0.

1pp), financial expenses budget -0.

01% (+0.

3pp).

  Railway orders increased rapidly, and performance growth was guaranteed.

In 2018, the company’s railway control system business income was 184.
600 million (+10.

6%), benefiting from the high level of new railways and the upgrade of high-speed rail control systems, the new contract signed in 2018 was 250.
800 million (+44.

8%).

The 2019H1 company gradually increased the size of newly signed contracts by 340.

200 million (+5.

3%).

Among them, the newly signed contract value in the railway field was 164.

600 million (+30.

1%), 54 new contracts were signed in the field of urban rail transit.

600 million (-9.

9%), the amount of new contracts signed in overseas areas4.

300 million (+15.

6%), the total value of new contracts signed in general contracting and other fields is 116.

700 million (-11.

7%).

New contracts in the railway sector with relatively high gross profit margins have grown rapidly, ensuring the company’s subsequent performance has grown steadily.

  Earnings forecasts and investment advice.

The company has ample railway orders in hand, and the newly signed contracts have grown rapidly, ensuring a steady growth in subsequent performance.

Expected company 2019?
In 2021, the EPS will be 0.

37/0.

43/0.

51 yuan, corresponding to the current market value of PE is 27/23/19 times, no rating is given for the time being.

  Risk warning: Rail assets investment is less than expected risk.

BT, BOT and other projects’ policies, benefits and repayments, project exits and other risks.

The progress of the investment project construction and the completion of production may be less than the expected risk.