Event: the political Bureau of the CPC Central Committee held a meeting on December 5, 2015 to analyze and study the economic work in 2015. The meeting stressed that it is necessary to promote the simultaneous development of new industrialization, informatization, urbanization and agricultural modernization. We will speed up the transformation of the mode of agricultural development, from the extensive management of mainly pursuing output growth, resources and consumption to paying equal attention to quantity and quality benefits, improving competitiveness, and paying attention to sustainable intensive development.
Main points:
The policy promotes the agricultural intensive transformation to benefit the agricultural machinery circulation industry.
At present, the mechanization rate of agricultural production in China is less than 60%, which is far lower than the 100% agricultural mechanization rate in Japan and South Korea. There is huge room for improvement in the future. An important reason for restricting the promotion of agricultural mechanization in China is the decentralization of agricultural production. This year, the Central Economic work Conference proposed the intensive transformation of agricultural production for the first time, saying that the policy will accelerate the promotion of agricultural intensive production in the coming year. This is in line with the ongoing determination of the rights of rural cultivated land and land transfer, which will greatly promote the rapid growth of agricultural machinery demand and benefit the development of agricultural machinery circulation industry.
The company has outstanding competitive advantages and is currently in a period of transition.
The company mainly engaged in agricultural machinery chain operation, currently in the agricultural machinery circulation industry market share first, for the industry leader, outstanding competitive advantage. The company has more than 190 direct stores throughout the country, covering more than 2600 terminal outlets across the country; the company has the vast majority of mainstream agricultural machinery agents, and quickly obtained high-quality agricultural machinery sales agents nationwide after listing. At present, the company basically covers the mainstream agricultural machinery agency; the company has the ability to integrate agricultural machinery display, sales, after-sale, training and financial leasing. The company entered the construction machinery circulation industry in 2010, which coincides with the top of the industry. in recent years, affected by the cliff decline of the construction machinery industry, the company's performance has declined obviously and even suffered serious losses. Recently, the company is divesting its construction machinery business, focusing on agricultural machinery circulation and returning to superior areas. in addition, the company is also strategically entering the fields of cash crop agricultural machinery, animal husbandry agricultural machinery and light agricultural tools. We are optimistic about the development prospect of the company returning to the field of agricultural machinery circulation in the future.
Earnings forecasts and valuations.
We maintain our previous profit forecast, and it is expected that with the divestiture of the construction machinery business and the integration of direct stores, the company will suffer a greater loss in 2014, while in 2015, with the gradual roll-out of revenue saving and efficiency and the development of strategic transformation, the company's performance will be greatly improved, and revenue from 2014 to 2016 is expected to be 35.72 pounds 42.86 / 6.001 billion yuan respectively. The net profit of returning to the mother is-164 million yuan, 49.3 million yuan and 138 million yuan respectively, and the EPS is-0.52,0.14 and 0.45 yuan respectively. We believe that the company's future entry into the new agricultural machinery circulation business will mainly adopt the mode of acquisition and merger, according to the previous acquisition of Jilin Jinqiao Agricultural Machinery and Liaoning HSBC, the company can generally use about 20 million yuan in cash to pry up about 300 million yuan in revenue. The company's current cash balance is about 350 million yuan, assuming that the cash flow generated by the company's original business can maintain the company's normal cash flow, then the current 350 million yuan can bring the company's sales growth of about 5 billion yuan. Taking into account the revenue scale of the company after the divestiture of the construction machinery business, the increase in the sales scale of 5 billion yuan is equivalent to doubling the company's current sales revenue. Assuming that the company's entry into the field of cash crops and animal husbandry agricultural machinery circulation can raise the company's net sales interest rate to 4%, then after the completion of the strategic transformation, the company will be able to achieve an annual net profit of 360 million yuan, valuing the company 20 times. The total market capitalization of the company can reach 7.2 billion yuan, maintaining the "buy" rating, with a 12-month target price of 20.16 yuan.