On August 26, Luen Mei Quantum (600167.SH), a listed company in Shanghai Stock Exchange, released its interim performance report, which indicated that during the first half of 2019 its business income was RMB 1.645 billion, its business profit was RMB 1.071 billion, and its net profit attributable to the owners of the parent company was RMB 815, a year-on-year growth of 26.10%. The company’s monetary capital was RMB 3.778 billion.

According to the data of Wind, by last Friday, 1,773 non-financial listed companies revealed their semiannual reports in the two stock markets, whose net profits attributable to the owners of parent company were RMB 660 billion, a year-on-year growth of 10.77%. The growth speed of net profit of Luen Mei Quantum was significantly higher than the average value of the two markets, carrying on the high profit, high growth and high amount of cash of its previous performance growth.

On August 26, the shares of Luen Mei Quantum were closed in RMB 12.10/share. Calculated with the closing price of RMB 6.70/share on January 2, the rise of stock price reached 80.6% this year. In the same period, the rise of Shanghai Composite index was 16.58%.

The industrial insiders pointed out that under the context of a strong volatility of the macro environment, the market brought more premium to the “certainty”. The double-business layout of “clean heat supply and high-speed railway digital media” of Luen Mei Quantum boasted a strong barrier and resistance to the cycle and a strong certainty in performance growth. As the state tried to promote clean heat supply and the effect of “high-speed railway economy” was unleashed continuously, the attribute of “core assets” of Luen Mei Quantum was increasingly prominent.

“Resistance to the cycle”: Carrying on the features of “high profit, high growth and high amount of cash”

During the first half of 2019, trade friction kept escalating in the changeful situations and the uncertainty of the external environment increased.

However, the interim report indicated that Luen Mei Quantum had carried on the features of “high profit, high growth, high amount of cash” of previous years. The basic earnings per share and the diluted earnings was RMB 0.36/share, with a year-on-year growth of 26.11%; its earnings per share after deducting its non-recurring gains and losses was RMB 0.35/share, with a year-on-year.

Behind the successive years of robust and stable growth was the advantages of the owners of Luen Mei Quantum in “the resistance to the cycle” and barrier. The company’s clean heat supply business covered basic projects concerning national economy and people’s livelihood such as heat supply, power supply and gas supply, which guaranteed the people’s livelihood and was not highly relevant with the trade environment.

It’s noteworthy that Mega-info Media, its principal company engaged in “high-speed railway digital media”, had also achieved a good performance growth: During the reporting period, its main business income was RMB 186 million, a year-on-year growth of 19.33%; its business profit was RMB 73.91 million, a year-on-year growth of 39.06%; its net profit was RMB 67.19 million, a year-on-year growth of 32.73%.

The high-speed railway media business also showed a distinctive barrier. At present, Mega-info Media covers 29 provinces, municipalities and autonomous regions, has signed with about 500 railway stations, owning over 6,000 digital media equipment. Mega-info Media has signed a long-term and exclusive contract with each railway bureau, which boasts a strong advantages in resources, barriers and early opportunities.

According to the research of Guosheng Securities, Luen Mei Quantum made more profits in heat supply and increased the value of high-speed railway media. It’s predicted that from 2019 to 2021, its net profit attributable to the owners of parent company will be RMB 1.55 billion, RMB 1.86 billion and RMB 2.21 billion respectively.

“Core assets”: recognized by the market

In early August, the object of securities margin trading of Shanghai Stock Exchange and Shenzhen Stock Exchange was expanded for the sixth time. Luen Mei Quantum was included. Analyzers agreed that the inclusion of Luen Mei Quantum indicated that the regulators and the market recognized its governance level, performance growth and development prospect.

On August 11, relying on its robust and stable performance and operating capacity, Luen Mei Quantum was honored as one of the “top 100 listed companies on the main board of China in value”. Its attribute of “core assets” was recognized by the investors.

The cash flow is the lifeline of any enterprise. According to the interim report, the monetary capital of Luen Mei Quantum was RMB 3.778 billion. With ample cash in hand, it provided a solid basic condition for its “copying in other places” and was expected to accelerate growth.

Industrial insiders said, as the state increased the support for the concentrated clean coal-fired heat supply and biomass heat supply, accelerated the development of heat and power co-generation and constantly developed low-carbon economy, Luen Mei Quantum will usher in a new round of development opportunities as it owns core technologies such as clean coal firing and biomass thermal power.

Under this trend, Luen Mei Quantum won favor from many institutions: During the second quarter of this year, the increase of bulk-Quantums of Luen Mei Quantum ranked third. In June this year, SAIC invested to subscribe bonds of RMB 500 million issued by the main shareholders of Luen Mei Quantum.

Going steadily to reach far: Its two main business display a huge growth potential

According to the interim report of Luen Mei Quantum, “The company will continue to uphold its philosophy of ‘innovation for development and details for becoming stronger’ and keep focusing its efforts on clean heat supply and high-speed railway digital media.”

In the field of clean heat supply, it has focused its effort for over ten years, with its gross profit margin maintaining at 40%-50%, which is far higher than the average level of the industry.

According to the “Planning of Clean Heat Supply for Winter of North China (2017-2021)” printed and issued by ten departments such as the National Development and Reform Commission, by 2021, the concentrated heat supply area of clean coal will reach 11 billion ㎡. In Shenyang, the planned heat supply area of 2020 aims to reach 357 million ㎡ and the proportion of combined heat and power co-generation will increase to 60%.

As introduced by the interim report of Luen Mei Quantum, in the future it will adopt a development mode combining endogenous growth and extensive investment and three models of “self-building, purchasing and energy management” to accelerate its expansion in clean heat supply business. It will continuously start from Shenyang and keep copying and developing across the province and the nation.

As to the high-speed railway digital media business, the interim report pointed out that it will enter the new field of high-speed railway digital media and further enhance its own earning power with the barrier advantages of Mega-info Media.

On August 23, at the awarding ceremony of the Creative Awards Innovation 2019, the case of “spring festival marketing for Wahaha Eight Ingredient Congee” submitted by Mega-info Media and Wahaha won a gold prize for marketing innovation. The strategic cooperation with leading enterprises of each industry such as Wahaha and FAW-Volkswagen and the constant innovation of marketing strategy support more than 30% of the net profit growth of Mega-info Media.

Market insiders believe that under the pattern of A share “strong players will remain stronger” and core assets of institutions, Luen Mei Quantum with a robust and stable performance will attract more attention from the market.

（source：Caijing Net）