Zhongke Sanhuan (000970): 2018 results meet expectations; demand is still in the adjustment period

Zhongke Sanhuan (000970): 2018 results meet expectations; demand is still in the adjustment period

The 2018 results are in line with expectations. The 2018 results announced by the third ring of China Science and Technology: operating income 41.

6 ppm, an increase of 6 in ten years.

9%, net profit attributable to the parent company2.

50,000 yuan, a year-on-year decrease of 12%, corresponding to a profit of 0.

23 yuan, net profit after deduction to mother 2.

4 ‰, a decline of 8 per year.


The company’s single-quarter operating income for the fourth quarter of 201811.

600 million, an increase of 3 every year.

0%, an increase of 11% from the previous month, and net profit attributable to the mother of 60.58 million yuan, a continuous decline of 25% and a decrease of 20% from the previous month.

Comments: 1) In 2018, the company’s comprehensive gross profit margin (the calculation margin of the gross profit margin is shown in the note to Chart 2) decreased by 2.

8ppt to 19.

6%; 2) The financial expenses in 2018 decreased by 182% to -50.28 million yuan, mainly due to the increase in exchange income, and the financial expense ratio increased from 1.

6% down 2.

8ppt to -1.

2%; 3) Cash flow from operating activities in 2018 was 2.

100 million US dollars, an annual increase of 2.

30,000 yuan to achieve normalization; 4) 4Q18 management costs are 1.

100 million US dollars, an increase of 12% per year, a 61% increase from the previous quarter, and 2 in 2018.

6 ppm, an increase of 6 in ten years.


5) Net profit of the subsidiary Ningbo Koningda in 2018 was 1.

07 million yuan, a year-on-year decrease of 36%.

Development trend The profitability of magnetic materials is still under pressure.

From January to February 2019, the production and sales of new energy vehicles nationwide were 150,000 and 14.

80,000 vehicles, an increase of 84% and 99% a year, maintaining rapid growth.

Looking at the general direction, the current domestic new energy vehicle industry is still in a transitional period of supplementation to consumption-driven, and the profitability of new energy vehicle magnetic material conversion in 2019 is still facing adjustment pressure.

Light rare earth prices are relatively stable.

The average domestic price of dysprosium and neodymium oxide was about 32 in 2018.

9 million / ton, down 3 per year.

9%, down since early 2019?
9% to 30.

90,000 yuan / ton.

Looking ahead, the potential impact of Myanmar’s import restrictions on light rare earth is limited, while domestic rare supply is still subject to crackdowns on illegal mining and environmental inspections. Demand-side new energy vehicles are factors that continue to grow. It is expected that the trend of rare prices in 2019 may stabilize.

Earnings forecasts are based on adjustments to 北京桑拿洗浴保健 assumptions such as neodymium iron boron revenue and gross profit margin. We raise our 2019/20 earnings forecasts to 18% and 26% to 0.

20 yuan and 0.
20 yuan.

Estimates and recommendations The company currently sustainably corresponds to February 19/20.

3x P / B, maintain Neutral rating and change target price from 8.

5 yuan up 12% to 9.

5 yuan, corresponding to 19/20 years 2.


1x P / B, compared to current expectations of 5.

5% downside.

Risks Lower-than-expected downstream demand; magnetic material prices fell more than expected.