Downstream prosperity dragged down from profit to loss, and Q4 performance continued to deteriorate.

During the reporting period, the company achieved revenue of 1.845 billion yuan, a decrease of 11.7% compared with the same period last year; the net profit of shareholders belonging to listed companies was-79.96 million yuan, from profit to loss; the net cash flow of operating activities was 17.72 million yuan, down 86.4% from the same period last year; and the weighted average rate of return on net assets was reduced to-19.5%. The company's Q1-Q4 revenue year-on-year-2.5% RMB1.9% RMB21.0%, losses of RMB 1861 / 65.26 million respectively in the third and fourth quarters, and increased losses in the second half of the year. On the one hand, it was dragged down by the prosperity of downstream steel, cement, glass and other industries; on the other hand, the company calculated losses of 41.71 million yuan in bad debts; accounts receivable increased to 1.015 billion yuan at the end of the year, an increase of 16.1% over the same period last year, and the payback continued to deteriorate.

There was a general decline in all sectors, and gross profit decreased slightly

The performance of all sectors of the company has generally declined over the past 15 years. Refractories for glass kilns are generally engineering construction, new production capacity in the glass industry is limited, and revenue from the company's plate dropped by 33.7% compared with the same period last year; cement kiln refractories and steel refractories as consumables are less affected by downstream shocks, with revenue down 4.1% from the same period last year; revenue from wear-resistant and heat-resistant materials decreased by 27.2%, and zircon sand was also dragged down as a raw material for glass kilns, with revenue down 21.8%. The company's total output of refractories increased by 3.1% compared with the same period last year, while total sales decreased by 8.3%. Raw materials for products such as zircon sand were purchased at 14-year iron ore highs, with falling prices and cost maintenance leading to a 0.5% drop in comprehensive gross profit.

Financial pressure, partial return of accounts receivable over the past 16 years, looking forward to supply-side reform and building materials integration in Chinese materials.

The company's interest-bearing liability ratio and asset-liability ratio have increased year by year, maintaining the current level of 49.6% and 75.5%, resulting in a rise in the rate of financial expenses to 5.6%; at the same time, the decrease in revenue has led to a relative increase in depreciation and labor costs, and the rate of management expenses has risen to 11.4%. Part of the accounts receivable of the company has been transferred to multiple periods in one year in 15 years, while the cost proportion of refractories to downstream steel suppliers is relatively low, and the provision of accounts receivable in 16 years will be reversed to a certain extent. Downstream demand is affected by the economic cycle, and supply-side reforms are expected to boost demand; the integration of building materials in Sinomaterials, on the one hand, can provide the company with more high-quality customers, on the other hand, it can provide the company with excellent management experience and capital operation experience, which is conducive to the company's long-term development.

Performance is expected to maintain the existing mass and maintain the "neutral" rating

It is estimated that the EPS of the company from 2016 to 2018 is 0.03 pound 0.04 pound 0.07 yuan. Refractory downstream demand is expected to maintain the status quo, 16 years the company began to enjoy 15 years of iron ore prices brought about by the gross margin increase, while accounts receivable provision has been reversed, the performance is likely to turn a profit. Overall, maintain a "neutral" rating.

Risk tips: the prosperity of the downstream industry is not up to expectations; the price of raw materials fluctuates; the integration of building materials in Chinese materials is not up to expectations.