China Chemical (601117): Performance growth slightly exceeded expectations Multiple strategies show initial results

China Chemical (601117): Performance growth slightly exceeded expectations Multiple strategies show initial results

Event description The company issued a pre-announcement of its 2019 results. It is expected that the attributable net profit in 2019 will increase by 50% over the same period of the previous year?
70%, after deducting non-attribution net profit increased by 60%?
80%.

Incident review confirmed that revenue maintained rapid growth + increased profitability, helping the company to achieve a substantial increase in performance.

The company’s performance growth in 2019 increased by 50-70%, mainly benefiting from: 1) The company’s 佛山桑拿网 orders have continued to grow rapidly in recent years, and the annual growth rate in 2017-2019 has reached 35%, 53%, and 57% respectively. These orders are gradually implemented and revenue is confirmed.Accelerating with it, according to the company’s preliminary statistics, it realized revenue of 1041 in 2019.

3.4 billion, an increase of 23.

2%, 5 faster than 2019Q1-3.

8pct; 2) During 2015-2016, some of the company ‘s relatively low gross profit margin orders have been basically digested, repeating the orders of relatively high quality in sequence and gradually landing.

47%, an increase of 0 every year.

53pct; 3) The company’s refined management has made initial progress. The company has continuously optimized its business layout, comprehensively promoted the reform of the production and operation management organizational model, reduced the number of third-tier enterprises, and refined management has brought about improvement in profitability.

Substantial progress has been made in Russia’s large orders, which will further boost revenue in 2020 and beyond, with steady growth in performance.

According to the company’s latest news, the company’s Russian Baltic Chemical Complex project has received an advance payment from the owner RusGasDobycha on December 27, 2019, marking the implementation of the project into a new phase, which has reduced the wasteful basis for the company to fully start the project’s EPC work., Also for the company’s 2020 revenue, performance growth and sustainable foundation.

The diversification strategy has shown initial results. The scale effect + refined management is expected to help the gross profit margin continue to increase.

The company reorganized the development path of “focusing on the main business of the industry, taking professionalism, diversification, and internationalization”, including two aspects of business diversification and regional diversification. In 2019, infrastructure facilities orders increased by 334% in the first half of the year.Both overseas orders and overseas orders have achieved rapid growth, and the diversification strategy has shown benefits; and the company’s marketing vigorously implements the “big customers, big markets, big projects” business philosophy, transforming the increase in project volume, and the scale effect will gradually be realized.The merged company continued to promote refined management and streamlined the joining level, which is expected to promote the continued recovery of gross profit margin in the future.

The company’s EPS for 2019-20 is expected to be 0.

59 yuan, 0.

69 yuan 1, corresponding to the implementation of PE for 11/2020/01/17.

45 times, 9.

83 times, it is estimated to be at the relatively bottom position in history, maintaining the “Buy” rating.

Risk Warning: 1.

The progress of overseas projects is less than expected; 2.

Oil prices have fallen significantly.