Good cost control and improved net profit margin

Hailanxin (300065) announced its first half of 2018: operating income of 319 million yuan, down 0.1% year-on-year; net profit of returning mothers of 60 million yuan, an increase of 23.5%, earnings per share of 0.16 yuan.

Focus on the ocean and improve performance

Continue to focus on the ocean and look forward to improving performance in the second half of 2018. 1. In the field of intelligent navigation, the strategic partner Yangzijiang Shipbuilding promises to select the company's intelligent equipment for the next three years from 2018 and not less than 100 million yuan per year. In the first half of 2018, the company's business volume with Yangzijiang doubled year-on-year; Looking forward, in the second half of 2018, we will focus on the business vessels, the north-south route, the new shipbuilding shipowner market with the domestic port as the home port, and further deep cooperation with the domestic large shipping group around the smart ship field. 2. In the smart ocean field, as of July 31, the Laurel industry has a hand-held order of nearly US$30 million. The company expects that the total amount of new orders will not be less than US$60 million during the year.

Valuation and recommendations

We adjusted the income growth rate, gross profit margin, and period expense rate, and lowered the 18/19 year net profit by 12%/23% to 144 million yuan/191 million yuan, corresponding to EPS of 0.4 yuan / 0.53 yuan. The company's current share price corresponds to 34.9x/26.2x P/E in 18/19 years. Based on the profit forecast adjustment, we cut our target price to 18.5 yuan, corresponding to 47x/35x P/E in 18/19, maintaining the “recommended” rating.