Dongfang Yuhong (002271): Fast growth in revenue and profits, focus on 2Q cash flow improvement

Dongfang Yuhong (002271): Fast growth in revenue and profits, focus on 2Q cash flow improvement

Performance review 1Q19 performance exceeded expectations Oriental Yuhong announced 1Q19 results: operating income of 26.

9 trillion, an increase of 41% in ten years; net profit attributable to mother +28 every two years.

9% to 1.

27 trillion, corresponding to 0 benefits.

09 yuan, deducting non-net profit growth rate of 40.

5%, exceeding market expectations, mainly due to strong sales growth and significant improvement in gross profit margin.

Comments: 1) Sales continued to grow at a high rate.

The company’s budget growth rate in the first quarter is strong, and it is expected to grow by 40-50% for the whole year, driving revenue to continue to grow at a rapid rate of 41%.

2) The gross profit margin improved significantly, and the gross profit margin of the company increased by 3 in 19Q1.

8ppt to 34.

5% (comparable to the 2018 average), but due to the further increase in asphalt prices, the gross profit margin decreased slightly by 1 in the first quarter of 19.


  3) Net decrease in operating cash flow29.

26 trillion, a decrease of 20 a year.

US $ 5.5 billion, mainly due to an increase in inventories of approximately 10 billion (mainly low-priced reserve asphalt) and a performance contract guarantee of approximately 1.5 billion.

4) The improvement of the cash-to-cash ratio is a positive signal.

1Q company cash ratio is 1.

4x, 1. for earlier Q18.

3x has improved at least.

  Development Trend Gross profit margin is expected to continue to increase in the second quarter.

1) On the price side, due to the overall upward trend in 上海夜网论坛 asphalt cost since last year, the company has agreed to raise prices with some downstream real estate developers this year, and the price increase will be realized in subsequent quarters.

2) On the cost side, the company actively reserves raw materials when the asphalt price drops in the first quarter. It is expected that the current asphalt inventory can be used until the end of May. It is necessary to tilt the impact of the 2Q asphalt price on the same and sequential increase.

We think the company’s 2Q19 gross profit margin has room to increase further.

  Pay attention to the improvement of operating cash flow in 2Q.

The company will actively adjust the pace of its business strategy this year, highlighting the improvement of operating quality as its primary goal, and will strictly control the collection of receivables.

In the second quarter of 19th, as the inventory level returned to normal and the receivables were strictly controlled, the operating cash flow is expected to improve significantly from the previous quarter.

  Earnings forecast We maintain earnings for 2019/20201.

33 yuan and 1.

71 yuan unchanged.

  Estimates and recommendations currently correspond to 19 / 20e 14.

1x / 10.

The 9 times price-earnings ratio is estimated to be attractive.

Maintain recommended level and target price of 26.

4 yuan, corresponding to 19 / 20e 20x / 15x P / E and 41.

3% upside.

  Risk demand growth was slower than expected, and cash flow improvement was lower than expected.