China Inspection Group (603060): Q3 performance is prolonged due to increase in cost and Q4 extension or contribution

China Inspection Group (603060): Q3 performance is prolonged due to increase in cost and Q4 extension or contribution

Core point of view: Q3’s performance has improved due to factors such as increased costs and expenses, and Q4’s outreach contribution may increase the company’s 2019 Q1-3 operating income to 6.

9.6 billion, an increase of 11 per year.

10%; net profit attributable to mother 1.

26 trillion, a ten-year average of 9.

67%; deduction of non-net profit1.

02 trillion, 10 in ten years.

44%.

By quarter, the company’s Q1-Q3 operating income increased by 21 each year.

15% / 10.

92% / 3.

86%; net profit attributable 武汉夜生活网 to mothers changes by +9 each year.

96% / + 6.

25% /-31.

87%; deducting non-net profit changes +52 each year.

16% / + 2.

29% /-35.

12%.

The growth rate of the company’s Q3 revenue is expected to be mainly affected by the decline in transportation efficiency in Beijing in September, while the performance growth rate is expected to be mainly due to increased costs and expenses (the paid employee expenses will increase by 53.43 million yuan, and the amount of paid taxes and fees increased)22.59 million) and increased competition in some regional inspection markets.

In the fourth quarter, it is expected that the internal growth rate of the business will gradually return to normal levels. In addition, the merger and acquisition of Anhui Topway and the two board regenerations in the early stage of mergers and acquisitions will accelerate, and the company’s Q4 performance will gradually recover.

Expenditure on operating cash flow increased, and the company’s debt ratio remained low at 19Q1-3. The gross profit / net interest rate was 45.

10% / 18.

87%, which decreases by 3 each year.

91/4.

59pct, of which Q3 gross margin / net margin were 42.

48% / 16.

94%, 8% each year.

76/10.

20pct, there is a substitute for the company’s overall profitability.

Company expenses during the period of 19Q1-3 26.

32%, an increase of 0 over the same period of 18 years.

69 points.

Among them, the sales / management (including R & D) / financial expense ratios are 3 respectively.

26% / 23.

19% /-0.

13%, an increase of 0 over the same period of the previous 18 years.

13/0.

49/0.

06 points.The company’s 2019Q1-3 net operating cash flow was zero.

6.7 billion, a decrease of 0 every year.

5.9 billion yuan.

At the end of the third quarter, the company’s assets and liabilities were replenished18.

51%, lower by the end of the earlier 18 years.

85pct, resistivity is still low.

Cross-regional & cross-domain mergers and acquisitions accelerated, leading effects gradually improved 1) The company’s cross-regional mergers and acquisitions were carried out simultaneously. The merger and acquisition of Anhui Tuowei at the end of September not only expanded the field of food and agrochemicals and environmental protection testing, but also was extendedBlank, in accordance with performance commitments, Anhui Tuowei will contribute no less than 7.08 million yuan in non-net profit in 2019.

2) Cooperation framework agreement between the company and the People’s Government of Zaozhuang City. The two parties established a joint venture in Zaozhuang to actively promote the integration and reorganization of Zaozhuang testing and certification institutions, opened a new model of institutional reform, opened up the Shandong inspection and certification market, and tested institutions.The restructuring is expected to accelerate.

3) The recent progress of the reorganization of the two materials has accelerated, and the company announced that Sinoma Group intends to incorporate eight subsidiaries into the company’s operations through joint ventures and other methods.

The profit forecasting and investment rating company’s testing industry is currently in a booming stage. The industry’s growth rate has been increasing year by year. The statistics of the inspection and testing service industry over the years show that the growth rate of the testing industry in 16-18 is 14.

7% / 15.

1% / 18.

2%.

The company is expected to achieve an orderly expansion through mergers and acquisitions. At present, the company is actively expanding its cross-regional mergers and acquisitions and cross-sectoral strategies. Outward mergers and acquisitions continue to accelerate.

Taking into account the accelerated growth of outbound mergers and acquisitions on the company’s profits and the impact of various factors in the third quarter on the company’s performance, we expect the company to achieve net profit attributable to its mothers in 19-21, respectively.

14/2.

57/3.

1.7 billion.

It is currently a stock inspection industry with an average PE of 36 in 19 years.

4 times, taking into account the growth of the company’s long-term performance and a slight change in 19 years’ performance, giving the company 35 times PE conversion in 19 years, the corresponding company’s reasonable value is 24.

5 yuan / share, maintain “Buy” rating unchanged.

Risk warning: industry policy adjustments intensify competition, insufficient talents for business expansion, project progress is less than expected, and merger and acquisition integration risks.