CSSC Defense (600685)： 4Q18 single quarter revenue improvement focused on the performance contribution of new orders received
CSSC Defense (600685): 4Q18 single quarter revenue improvement focused on the performance contribution of new orders received
Performance review The 2018 results are in line with expectations. The company’s 2018 results announced: operating income 192.
1.4 billion (89% of the plan completed), a decline of 16 over.
17% (comparable caliber); net profit attributable to parent company -18.
69 ppm (comparable caliber in 2017 was -0.
51 ppm), corresponding to a profit of -1.
32 yuan; deducted non-attributed net profit -17.
580,000 yuan (comparable caliber in 2017 was -10.
In 2019, the company plans to realize 21.6 billion in revenue and 29 billion in contracts.
Initial income and gross profit margin decreased, but single-quarter revenue in 4Q18 has improved significantly.
By business: 1) Shipbuilding business realized revenue of 15.1 billion yuan, YoY-16.
34%, gross profit margin -0.
91%, YoY-8ppt, mainly due to the impact of part of the ship orders to accept the expected transition, plant relocation, etc .; the gross profit margin of oil tankers YoY-11ppt to -6.
5%, the gross profit margin of container ships YoY-6ppt to 4.
38%, the gross profit margin of special vessels YoY-8pptppt to -0.
73%, the gross profit margin of bulk carriers YoY + 4ppt to 4.
2) Offshore engineering business realized revenue of 1.4 billion, YoY-33%, gross profit margin -11%, YoY-5ppt.
3) Ship repair and modification realized revenue of 900 million, a year-on-year increase of + 7%, and a gross profit margin of 13%, a year-on-year increase of + 7ppt.
Earliest, 4Q18 single quarter revenue has begun to improve, achieving 75 ppm revenue, QoQ + 111%.
Asset impairment losses and foreign exchange derivatives dragged down performance.
Asset impairment losses in 20186.
USD 7.7 billion, of which: 1) Due to the increase in ship construction costs and the delay in production progress due to the relocation of the plant area, provision for impairment of contract performance costs for shipbuilding products under construction was 300 million; 2) Provision for Huangpu Wenchong Offshore ProjectProvision for impairment 2.
At the same time, the company holds a large number of foreign exchange derivatives. Due to the depreciation of the RMB, the floating loss on the book increased. The fair value change income in 2018 was -4.
The development trend focuses on the performance contribution of new orders.
New orders received in 2018 were 293.
360,000 dwt, an increase of 50% in ten years; existing companies hold 574 orders.
30,000 deadweight tons.
As the new ship price index continues to rise, we expect that new orders will effectively increase future revenue and gross profit.
Profit forecast remains unchanged from 2019/2020 net profit forecast.
Estimates and recommendations Companies currently sustainably correspond to 19 / 20e 2.
3x P / B.
We are optimistic about the company’s development opportunities in the recovery of the shipbuilding industry and strategic restructuring in the shipbuilding sector, and maintain the recommendation; raise the A / H target price by 75% / 25% to 2南京夜网论坛1 yuan / 10 replacement, the stock corresponds to 19 / 20e 2.
9x / 2.
8x P / B, H shares correspond to 19 / 20e 1.3/1.
2x P / B, A / H potential increase 22% / 26%.
Uncertainty in risk exchange rate changes; state-owned enterprise reform, recovery of civilian ships, and less than expected military deliveries.