Shanghai Mechanical & Electrical (600835): No

Shanghai Mechanical & Electrical (600835): No

We expect the company to return to its parent net profit for 2019-2021.

99 (-2.

89), 14.

07 (-1.

82) and 17.

23 (-2.

00), mainly due to the downward adjustment of revenue growth expectations for 2019-2021 and the delay in gross profit margin expectations.

From January to October 2019, China’s elevator output increased by 14.

4%, from January to September, the profit of the elevator industry increased by 26%, and the recovery trend of the elevator industry continued, showing a “quantity increase and stable price.”

According to the continued recovery in the demand of the Chinese elevator industry in the future, it is expected that the recovery of the company’s gross profit margin in 2020 will lead to the return of the return to the mother’s profit.

“Volume increase and price stability” promoted the elevator industry’s profit to increase 26% in the first three quarters of 2019. According to KONE Group’s third quarterly report, in the first three quarters of 2019, competition in the Chinese elevator market remained fierce, but the pricing of the new equipment market was fairly stable.

We believe that the pick-up trend of China’s elevator industry has continued since 2019. Leading companies have newly shortened orders and their revenue has improved compared to 2018. It is expected that China’s elevator prices will bottom out in 2019.

According to the National Bureau of Statistics, China’s elevator and lift output was 95 on January 10, 2019.

50,000 units, an increase of 14 in ten years.

4%; In the first three quarters of 2019, the total revenue of elevator enterprises above designated size in China totaled 19.56 million yuan, an increase of 10 in ten years.

94%, total profit 134.

48 ppm, an increase of 25 in ten years.

83%.

It is expected that “volume increase and price stability” may accelerate the acceleration of Shanghai Electromechanical ‘s return to net profit in 2020. It is estimated that the output of Shanghai Mitsubishi Elevator will exceed 100,000 units in 2020, with a compound growth rate of approximately 10%.The stock has continued to increase, the self-maintenance rate has increased, and the number of renovation projects has increased. It is expected that the compound growth rate of elevator service revenue will exceed 10% in 2020-2021.

The company’s gross profit margin in the single quarter of 2019Q3 narrowed to 0.

In the 17 years, we expect to gradually increase the carry-over of pre-orders and the bottom of China’s new elevator sales price in 2019, and the decline in steel prices. It is expected that the gross margin of Shanghai Mechanical and Electrical is expected to rise quarter by quarter in 2020, which will lead to an increase in operating profit margin and returnZero parent net profit accelerated.

The pessimistic expectation has been reflected and it is estimated that it will exceed the average of comparable companies. We strongly recommend that we believe that the current Shanghai mechanical and electrical industry has reflected the company’s revenue growth and return to net profit growth expectations for 2019, and the worst period has 杭州桑拿 passed.

As of November 30, 2019, the arithmetic average PE of 4 A-shares and 2 foreign-listed comparable companies was 23.

19 times, PB (LF) is 3.

67 times, significantly more than the Shanghai Mechanical and Electrical Evaluation.

According to the “elevated volume and stable price” of China’s elevator industry or the acceleration of Shanghai Mitsubishi’s net profit recovery in 2020 and the disposable cash of Shanghai Electromechanical’s parent company exceeding 5 billion yuan, it still maintains the “highly recommended” rating.

Risk reminder: prolonged real estate and infrastructure construction cycle; risk of credit impairment of accounts receivable