CUHK (600704) 19Q3 Review: Obvious advantages of supply chain leader Blockchain helps improve efficiency
Event: In the third quarter of 2019, the company gradually realized a total operating income of 252.2 billion US dollars, an increase of 18 years.
5%; gradually realize net profit attributable to mothers23.
700 million, an annual increase of 30%; gradually realize the net profit of non-attributed mothers18.
US $ 600 million, an annual increase of 65%, and non-recurring gains and losses mainly come from the transfer of Jiangxi Haihui (2.
9.3 billion), CUHK Qingkun Investment (2.
2.3 billion) and Zhejiang Blue City Construction (0.
6.7 billion); budget revenue of 0.
49 yuan, a year-on-year increase of 28%.
Summary of highlights: We believe that the highlights of the company’s investment are: (1) The operating efficiency has improved significantly and the expenses have dropped significantly.
The company’s asset turnover rate rose to 2.
42 times (2018Q3: 2.
14 times), the net profit attributable to the parent company rose to zero.
74% (Q3 2018: 0.
53%), driving the ROE to 11.
43% (2018Q3: 9).
13%). The improvement in efficiency is due to the continuous upgrade of the company’s integrated supply chain service system, which has led to a decline in the ratio of three fees to revenue, and the company’s equity multiplier has also increased from 4 in the same period.
5 is expected 4.
(2) The supply chain has ample room for growth, benefiting from national strategies such as the integration of the Yangtze River Delta.
Involved in mature foreign markets, the upstream supply chain industry has room for development and improvement of concentration. We expect that the Yangtze River Delta integration strategy and the development of international business will continue to bring incremental business opportunities for the company.
Many of the company’s core varieties are at the forefront of the industry, and they have a competitive advantage in the industry in terms of business resources, capital costs and supply chain system construction.
(3) Blockchain technology application, new growth and new business layout bring new momentum.
The company has cooperated with banks to incorporate blockchain technology into the management of accounts receivable, which can effectively reduce the overall cost of the supply chain and improve operating efficiency. Through technology upgrades and wider application, we expect the company’s business scale and management efficiency to beIt can further improve; gradually, by setting the growth and landing and the layout of new business, the company’s future growth momentum is sustainable.
Supply chain: breakthroughs in key projects and international business, and system upgrades to practice “circulation”.
2019H supply chain integration services business revenue 152.1 billion (+20 compared to the same period last year).
5%), the gross profit margin fell slightly 2.
2% (-13% YoY).
The company’s supply chain integration services have made progress in the following areas: 1) Benefiting from the national strategy, winning a number of key projects.
This year, we won new bids for the Hangzhou-Ningbo Expressway Double Line, Guangzhou Rail Transit Line 13, and other key projects. The cable business won new bids for the Shanghai National Convention and Exhibition Center, Hangzhou Asian Games Stadium, Xiamen Metro, and Zhengzhou Metro. We expect the Yangtze River Delta to be integrated.The strategy of construction and construction of key national infrastructure projects will continue to bring incremental business opportunities to the company.
2) Breakthroughs in international business.
Exploring overseas markets such as the Philippines, Vietnam and South America, the third country’s steel trade volume increased by 25%, and obtained Zhejiang Province’s first crude oil non-state trade import qualification.
3) System upgrade.
The Group cooperates with enterprises such as Ali to advance the work of “Digital Transformation Year”, and large enterprise groups with strong supply chain attributes and e-commerce platforms for specimens. Among them, the smart supply chain digital platform of China Chemical Industry has entered the implementation stage.
Financial services: (1) Financial support for the development of major businesses.
2019H financial services segment achieved operating income of 39 ppm (YoY + 255%), and gross 北京夜网 profit margin decreased by 13.
5% (-57% year-on-year, it is expected that the spot price will lead to floating losses in futures positions in advance).
The value of financial services to the main business is reflected in: strengthening capital turnover efficiency and reducing friction costs; achieving hedging functions to seize investment potential; and providing comprehensive value-added services.
(2) Blockchain technology improves efficiency.
According to the company’s historical announcement, the company has cooperated with Zheshang Bank to apply blockchain technology, mainly in the issuance, acceptance, confirmation, payment, transfer, pledge, and redemption of accounts receivable.
Through blockchain technology, Zhongda University and upstream and downstream companies establish a “fundless” supply chain business circle, which can effectively reduce the overall cost of each supply chain enterprise and transaction and improve operating efficiency.
Due to the company’s diversified business layout and solid supply chain foundation, the company has a wealth of blockchain application scenarios. At the same time, the supply chain core companies face decentralization, high-occupancy, and high-risk operations.The application has been improved, so we expect that the application and upgrade of blockchain technology can further improve the company’s operating efficiency, and also help the company expand the scale of supply chain management.
High-end industrial business: Layout medical and environmental protection, and expand new growth points.
2019H high-end industry achieved 41 trillion revenue (YoY + 17%), gross profit margin 16.
2% (+ 4% YoY).
Based on its own resource endowment and the direction of transition and upgrading, the company proactively deployed medical industry, environmental protection, and other active industries.
At the end of the first half of the year, the company has deployed 4 general hospitals with about 3,000 beds; it has formed an urban sewage treatment capacity of 40 per year / day (2018: 30 per day / day).
Dingzheng was approved to provide new growth momentum.
The 2 ppm fixed increase plan was approved in July this year, of which 26.
90,000 yuan for supply chain integration services, 2.
$ 400 million supply chain support platform.
The fixed increase will help the company expand its business scale and optimize the industrial layout, stabilize the change in performance, and provide new momentum for the company’s performance growth.
Investment advice: Buy-A rating.
We expect the company EPS for 2019-2021 to be 0.
84 and 0.
86 yuan, press 8.
5xPE gives a target price of 6.
Risk warning: Expenses of rising costs / pre-expected business synergy / low-end industrial investment returns