Top Group (601689) 2019 Interim Report comment: short-term performance under pressure growth path remains unchanged

Top Group (601689) 2019 Interim Report comment: short-term performance under pressure growth path remains unchanged

Matters: The company released an interim report, with 1H19 revenue of $ 2.4 billion / -21%, and 1-2Q19 were 12 respectively.

5 billion / -17% and 11.

9 ppm / -24%; net profit attributable to mother 2.

1 ppm / -52%, 1-2Q19 are 1 respectively.

100 million / -43% and 1.

0 ppm / -59%.

Comment: The revenue side is affected by the industry boom and the rhythm of downstream customers. The pressure in the second quarter is greater than that in the first quarter.

One of the company’s core customers, Geely 1-2Q19, sales growth rates were -5% and -25%, which were a drag on the company’s second-quarter 杭州桑拿 revenue formation; SAIC-GM was -13% and -13%, respectively. Quarterly fluctuations were not obvious.
In addition, the annual decline of some car company customers is often negotiated around March, and it is estimated that it will also have a certain impact on the company’s second quarter revenue.

In terms of products, shock absorption revenue was 9 in the first half of the year.

900 million / -15%, interior decoration 7.

900 million / -34%, chassis 5.

0 billion / -15%, automotive electronics 0.

500 million / -32%, the largest size of interior trim parts, the largest impact on total revenue.

The gross profit margin was mainly affected by the new depreciation brought by the conversion of automotive electronics projects.

The company’s gross profit margin for 1H19 was 26% in two years -2.

0PP, -0 chain.

9PP; 1-2Q19 are 26% and 26%, respectively -3PP and -1PP.

In the first half of the year, the company’s fixed assets increased by 7 compared with the end of December 2018.

3 trillion, of which 1-2Q19 +0 respectively.

100 million, +7.

3 trillion, combined with the changes in the construction in progress can be judged that the first half of the transfer to solidification occurred in the second quarter, and mainly for automotive electronics projects (first half of the smart brake project transferred to solid 3).

600 million, automotive electronics engineering turned solid1.

700 million, a total of 5.

300 million, accounting for about 70% of the solidified carbides in this period).

Finally, the depreciation / revenue reached 5 in the first half of the year.

7% for one year.

7PP, +0 chain.

7PP, roughly the same as the decline in gross profit margin.

In terms of products, the gross profit margin of the automotive electronics business after a large number of conversions was 32% in the first half of the year, which was changed to -7PP, which was -1PP from the previous month.20%, -3PP in a year, -5PP from a month-on-month, the largest range from a month-on-month, 17% of chassis business, -5PP from a decade, + 1PP from a month-on-month.

During the period of 1H19, the expenses are 16%, and the annual -1PP.

It was 16% in the second quarter of 19, and -1PP in one year, which was basically flat month-on-month.

Binding high-quality customers to grow together, and the growth path of category expansion remains unchanged.

The company continues to maintain R & D expenditures that account for more than 5% of revenue. At present, it has become one of the few domestic parts suppliers that can simultaneously develop with international mainstream car companies, and gradually formed three major business lines: 1) Traditional NVH: 2018Revenue of 4.5 billion US dollars (total shock absorption, total interior parts), future growth space comes from internal share increase.

2) Chassis system and lightweight products: 2018 revenue 11.

700 million US dollars, the company has a complete process category, and the product variety is constantly diversified. It is expected to form a stable advantage in large-volume products and customer scale in the future. At the same time, it will further expand to mainstream new energy vehicle companies and expand models.

The company’s mid-term target chassis is 50 ‰ + lightweight 50 ‰ / annual revenue volume, which is about twice the top revenue of 2018.

3) Automotive electronics: 2018 revenue 1.US $ 300 million, currently mainly for EVP, and smart brakes, smart steering, electronic water pumps and other products under development. It is expected that the value of bicycles in automotive electronics in the future is expected to exceed the current average value of bicycles in NVH, and the profit margin is also expected to be higher (higher grossinterest rate).

Investment suggestion: The company’s short-term performance is under pressure, and the three major businesses in the future are expected to gradually release new growth momentum.

Considering the recovery of the industry and new orders for mass production, we expect the company’s net profit for 19-20 to be 5.

5 billion, 8.

1 ‰, -28% for one year, + 49%, corresponding to 20 times and 14 times of the current PE, the first coverage, given a “recommended” rating.

The company’s PE is estimated to be 30 times the center in the past 4 years and 20 times in the past 2 years, with a target price of 11.

6 yuan, corresponding to 22 times and 15 times the PE in 19-20 years.

Risk warning: industry sales are lower than expected, new developments exceed expectations, and automotive electronics progress is lower than expected.