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Snow Diron (002658) 2018 Annual Report Review: Costs and Expenses Drag the Company’s Performance Below Expectations

Snow Diron (002658) 2018 Annual Report Review: Costs and Expenses Drag the Company’s Performance Below Expectations
Event: The company released the 2018 annual report and achieved operating income12.89 ‰, an increase of 18 per year.87%, net profit attributable to mothers1.79 trillion, a decrease of 16 a year.54%, net profit after deduction is 1.71 ppm, a reduction of 17 per year.49%, basic profit income is 0.30 yuan, a reduction of 16 per year.67%.In the fourth quarter of a single quarter, operating income4.4.1 billion, an increase of 3 every year.53%, achieving net profit attributable to mother 0.40 ‰, a decrease of 59 per year.34%. Opinion: Benefiting from the strengthening of environmental protection constraints, the business operation of the company’s various segments is normal: sales revenue of environmental monitoring business.81 ppm, a six-year increase of 6.06%; the operating income of the industrial process analysis system is 94.57 million yuan, an annual increase of 15.95%; operating income of gas analyzer and spare parts business2.2.1 billion; annual growth of 67.26%; system transformation and operation and maintenance business income 2.13 trillion, basically flat for one year; revenue from environmental governance and environmental protection and energy saving business was RMB 90.6 million, an annual increase of 206.45%. Costs and expenses weigh on company performance.The company’s gross profit margin in 2018 was 43.48%, a decline of 4 per year.87; net interest rate is 13.97%, a decline of 5 per year.67 pct, the specific reason is that the research and development costs reached 90.07 million yuan, an increase of 30 in ten years.27%; personnel and related costs increase by 23 each year.19%; total budget expenditure increased by 26%; selling expenses amounted to 1.800 million, an annual increase of 33.64%; At the same time, the accrued interest on convertible bonds is about 25.85 million yuan. The industry is basically facing a good trend, and needs to pay attention to structural changes in demand and macro-downward trends.Solid technology, stable operation and better cash flow have always been the company’s advantages.We believe that the logic of increasing demand for monitoring equipment due to environmental protection remains unchanged, so the company ‘s future target business revenue growth is still certain; but the company’s downstream customers will gradually move to related industries with non-electric ultra-low emissions, VOC governance and other needsThe industry structure is more fragmented, and competition will be more intense. At the same time, under the influence of the macroeconomic downturn cycle and previous supply-side reforms, deleveraging will reduce the company’s ability to pay.Therefore, we believe that the company’s profitability will be affected to some extent in the future. Downgrade to “Overweight” rating: Although the company’s revenue can maintain a certain growth, but the macro factors and intensified competition in the industry have led to a decline in profitability, 四川耍耍网 we lowered our profit forecast and expect the company’s net profit for 2019-2020 to be 1.97/2.11 ppm (original value of 3.03/3.4.8 billion), plus a 2021 net profit forecast of 2.24 ppm, corresponding to 19 to 19 EPS.33/0.35/0.37 yuan, PE is 27/25/23 times.After the overall assessment and repair of the industry in the first quarter of 2019, we believe that the current assessment is at a reasonable level and we have downgraded to the “overweight” rating. Risk reminder: The progress of environmental protection policy implementation has exceeded expectations, market competition has intensified, technology and talent are lost, and business integration risks.