Hang Ke Technology (688006): Performance in line with expected receivables, cash flow attempts to improve in the second half of the year

Hang Ke Technology (688006): Performance in line with expected 杭州桑拿 receivables, cash flow attempts to improve in the second half of the year

Brief evaluation of the company disclosed the semi-annual report, the company achieved revenue in the first half of 20196.

3 billion, an increase of 25% in ten years; net profit attributable to mothers1.

79 trillion, an annual increase of 31%; deducted non-attributed net profit1.

690,000 yuan, an increase of 30% in ten years.

The company’s performance was in line with expectations, and the overall operating situation remained in a good shape.

The 31% increase in the interim results of business analysis was in line with expectations. The operating efficiency has been steadily improved, and cash in hand is abundant.

Performance increased steadily, and net profit attributable to mothers increased by 31%, in line with expectations.

Operating efficiency has been steadily improved, and gross profit margin has remained at 48.

The higher level of 1% is basically the same as the previous period; thanks to the reduction of the expense ratio (the management expense ratio decreases by 2 every year).

1pct, the sales expense rate decreases by 1 every year.

7pct), the net profit margin increased to 28.

4%, an increase of 1 per year.

4pct.

The company has 5 cash in hand.

500 million.

Receivables turnover and operating cash flow have improved, mainly due to changes in downstream industries. We judge that it is expected to improve in the second half of the year.

1) Accounts receivable turnover days were 79 days, which increased about 48 days in the same period last year; operating cash flow was 17.81 million yuan, a decrease of 79%.

In our opinion, the reason for the company’s poor receivable turnover and poor cash flow is that in the first half of the year, new energy vehicles were withdrawn, the power battery whitelist was cancelled, and the industry was in a painful period.

2) We judge that the company’s receivable turnover and cash flow are expected to improve in the second half of the year.

We see that new energy vehicles have returned to the growth trajectory, with sales increasing by 80% in June, and market demand has begun to improve; downstream leading power battery manufacturers are highly certain to expand production. For example, the Ningde era has increased investment in European battery projects.

The leading advantages are prominent, and the downstream is oriented towards two major categories of power and consumer batteries, with demand growing and sustainable.

1) The company is a leader in lithium battery back-end equipment, which is tied to international leading battery manufacturers such as LG Chem, South Korea SDI, etc., and its competitive advantage is constantly enlarged in the event of technological disruption.

2) Facing the two major categories of power and consumer batteries, downstream demand is good.

In the field of power batteries, under the trend of centralization and growth, the average purchase demand will increase by 33% from 2019 to 2021; in the field of consumer batteries, 5G will promote the gradual transformation of battery technology and the replacement 都市夜网 and upgrade of production equipment.

Profit adjustment and investment recommendations We maintain our profit forecast unchanged. We estimate that the company’s operating income for 2019-2021 will be US $ 1.6 / 20 / 2.5 billion, an annual increase of 42% / 29% / 24%; net profit attributable to mothers3.

7/5.

0/6.

3 ‰, a year increase of 29% / 34% / 27%, a compound growth rate of 30%; maintaining PE 32, PS 7 times, the target price of 36-39 yuan.

Risks suggest that the battery expansion project is less than expected; the withdrawal of new energy vehicles brings short-term demand pain; the risk of overcapacity in power batteries; the risk of new-generation battery technology replacement; 5G is weaker in catalyzing battery technology iteration.