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Longji (601012) 2019 Third Quarterly Report Review: Profitability Enhances High Growth and Promotes Maintenance

Longji (601012) 2019 Third Quarterly Report Review: Profitability Enhances High Growth and Promotes Maintenance
The company’s Q3 profitability has significantly increased, its cash flow has improved significantly, and its performance is close to the upper limit of the forecast. At the same time, it has accelerated the pace of capacity expansion, benefiting from the continuous decline in costs and the release of capacity beyond expectations, and gradually broke through the product price reduction cycle to achieve sustained high growth in performance.Maintain the company’s EPS forecast for 2019-2021.31/1.82/2.06 yuan, corresponding to PE 17/13/11 times, given a target price of 36 yuan, maintaining a “buy” rating. The performance was close to the upper limit of the forecast, and the profitability was significantly enhanced.The company achieved revenue of 226 in 2019Q1-3.930,000 yuan (ten years +34.38%, the same below), net profit attributable to mother 34.8.4 billion (+106.03%); of which Q3 achieved revenue of 85.8.2 billion (+83.80%), net profit attributable to mother 14.7.5 billion (+283.85%), the profit is close to the forecast limit.The gross profit margin of the company’s sales in Q1 2019 was 27.63% (+5.38pcts), with an expected ROE of 17.04% (+5.68pcts), the profitability increased significantly or benefited from the tight supply and demand of monocrystalline silicon wafer prices maintained strong 杭州桑拿网 and costs continued to decline. Operating efficiency improved steadily, and cash flow improved significantly.The company continued to optimize its component business operation and management capabilities. The Q3 inventory turnover days remained at a better level of 85 days and decreased slightly from the previous month. The accounts receivable turnover days decreased by nearly 10 days from the previous month.In 2019Q1-3, the company’s net cash flow from operating activities was 40.1.4 billion (+278.35%), the net profit cash ratio is 1.15 (+0.52), the significant improvement in cash flow is expected to be related to the increase in the proportion of overseas businesses with better receivables; the company’s period expenses8.21% (-1.18pcts), of which sales / management / financial expenses3.66% / 3.71% / 0.84% (-1.01 / -0.17 / –无锡桑拿网0.01pcts), the ability to control costs has continued to increase. The progress of production capacity accelerated, and the scale advantage increased.The company accelerates the pace of silicon wafer and battery module capacity release. The second phase of Yunnan Baoshan and Lijiang’s 12GW silicon rod silicon wafer project are accelerating and it is expected to reach production in advance in 2020Q1. It is announced that it will raise no more than 5 billion convertible bonds to build Yinchuan’s 15GW single crystal.Silicon rods, wafer projects, and the first Weiwei New City 5GW single-crystal battery project. At the same time, another 5GW single-crystal module project in Jiaxing is under construction. It is expected that by 2020H2, 65GW single-crystal silicon wafers, 20GW single-crystal batteries, and 30GW single-crystal module production capacity will be formed.The advantages of scale are constantly consolidated, and the market strength will be further enhanced. It is expected that the price of silicon wafers will gradually decrease, and the advantage of cost + scale will ensure high profits.The company’s monocrystalline silicon wafer cost has been steadily reduced, as it is currently 3.The price of 07 yuan / piece, we estimate the company’s silicon wafer gross margin or more than 35%.Although the new production capacity of the monocrystalline wafer industry will be released in the next half of the year, it will be added to the shortage situation at the same time.It is still expected to maintain more than 25%, and the growth rate is expected to reach 80%, and the profit of the silicon wafer business may maintain rapid growth. Risk factors: PV installation growth exceeds expectations, capacity release exceeds expectations, and product prices change too quickly. Investment suggestion: The company is expected to achieve high growth with its cost and scale advantages, maintaining its 2019-2021 net profit forecast49.3/68.5/77.9 trillion, corresponding to EPS 1.31/1.82/2.06 yuan, the current price corresponds to PE17 / 13/11 times, given a target price of 36 yuan (corresponding to 20 times PE in 2020), maintain “Buy” rating.