Main points:
1. UHV, rapid growth of distribution network investment, steady growth of railway investment, optimistic about the company's revenue and profit prospects; actively expand new products to enhance competitiveness
The company's prospectus makes it clear that the company's wire and cable products are sold mainly by "direct sales", mainly by participating in the bidding of large customers such as State Grid, Southern Power Grid, Railway Corporation and so on. With the rapid increase of power grid investment and the steady increase of railway investment, the company is expected to continue to benefit.
In November 2014, there were three UHV lines under construction in China; at present, a total of 8 UHV lines are under construction, 1-2 UHV lines are expected to be approved this year, and 9-10 UHV lines are expected to be under construction by the end of this year. President Xi proposed to explore the construction of a global energy Internet at the United Nations headquarters in September, and several transnational networking projects are being carried out in an orderly manner. According to the announcement of the State Grid Corporation, the company has won the bid well in the bidding for power grid equipment. Considering the 20-24 month construction period of the UHV project, the main orders under construction are expected to contribute profits in the year after next year, which is expected to steadily increase the profits in the year after next year.
In 2014, the national investment in the distribution network was about 200 billion yuan. At the end of August 15, the Energy Bureau made it clear that the national investment in the past 15 years was 300 billion yuan, and the cumulative investment during the 13th five-year Plan period was not less than 1.7 trillion yuan. On August 31, 15, the State Grid began to bid for new batches of distribution network. At present, the State Grid is organizing the third batch of distribution network bidding (if new batches are considered, it is currently the fourth time in 2015). There is a large gap between the current investment and 300 billion, and it is expected that the bidding scale will be increased in the later stage, and the company will continue to benefit.
In October, the NDRC approved eight railway projects with a total investment of about 301.235 billion yuan. with the state increasing investment in railway projects, it is expected that the company's railway project orders and profits will increase steadily.
In the first three quarters of 2015, the company's operating income was 2.309 billion, up 17.04%, and net profit was 93.87 million, up 23.61%. Revenue and profits are expected to grow steadily for the whole year.
The company continues to increase investment in the research and development of new products and new technologies, and has successfully developed new products such as aluminum tube support wire aluminum alloy enlarged busbar, special photovoltaic cable, wrinkled copper sheathed fireproof cable, aluminum alloy special cable and so on. The project of special cable for urban rail transit and special cable for wind power generation is progressing smoothly. As the company actively increases the layout of special cable field, it will further improve its profitability.
2. Employee stock ownership plan and major shareholder increase provide a certain margin of safety.
As of September 30, 2015, the company's employee stock ownership plan to buy a total of 3499339 shares of the company, accounting for about 1.64% of the company's total share capital, the total transaction price is 67007622.73 yuan, and the average transaction price is about 19.15 yuan per share. The lock-up period of the shares purchased by the employee stock ownership plan is 12 months from the date of this announcement.
From July 13, 2015 to September 30, 2015, Mr. Sun Qingyan, the chairman and actual controller of the company, accumulated 554140 shares of the company, with a total transaction price of 14.8088 million yuan. At the end of September 2015, the Sun Qingyan family controlled about 58.2% of the total share capital of the company.
3. Profit forecast and rating
The company benefits from UHV, distribution network, railway construction; employee stock ownership plan, major shareholder increase to provide a margin of safety. It is estimated that from 2015 to 2017, the EPS of the company will be 0.69,0.88,1.12 yuan respectively, and the corresponding valuation will be 43 times, 34 times and 27 times respectively.
4. Risk hint
The investment in power grid and railway is not up to expectations; the scope of business is too concentrated; the risk of the company winning the bid is lower than expected.
