Event: on October 25, 2016, Falsheng released its 2016 three-quarter report. According to the report, Falsheng's operating income in the first three quarters of 2016 was 1.57 billion yuan, up 22 percent from the same period last year, and its net profit was 140 million yuan, up 146 percent from the same period last year.
The company's business adjustment and transformation bring about performance improvement. The company's net profit increased significantly in the first three quarters of 2016, with a year-on-year growth rate of 146%. There are two main reasons: first, the company transferred 100% equity stakes in three metal products subsidiaries for 460 million yuan in the first half of 2016. Second, the company successfully completed the acquisition of Moshan factoring and realized the merger.
Acquire business factoring to improve profitability. On April 20, 2016, the company passed a motion on cash acquisition of 100% stake in Shanghai Moshan Commercial factoring Co., Ltd., and Moshan factoring became a wholly-owned subsidiary of the company in the first half of 2016.
(1) Moshan factoring fulfills its performance commitment. According to the acquisition plan of Moshan factoring, Moshan factoring has made a commitment that the net profit attributable to the shareholders of the parent company will reach 110 million yuan, 120 million yuan and 160 million yuan respectively after deducting non-recurring profits and losses in each year from 2015 to 2017. In 2015, Moshan factoring achieved 112 million yuan in net profit attributable to the shareholders of the parent company after deducting non-recurrent profits and losses, fulfilling its performance commitment. In the first half of 2016, the scale of Moshan factoring expanded rapidly, with operating income of 210 million yuan, an increase of 105% over the same period last year, and a net profit of 58 million yuan, an increase of 73% over the same period last year.
(2) there are many items of Moshan factoring reserve and the business model is innovative. There are many Moshan factoring reserve projects. By the end of October 2015, there were 59 Moshan factoring reserve projects, providing clients with factoring financing of about 3.7 billion yuan. In addition, the business model innovation of Moshan factoring, May 2015, the company promoted the implementation of the "Moshan factoring Phase I Asset support Special Plan" to raise 438 million yuan of special funds, which is the first asset securitization project based on factoring financing claims in China.
The factoring industry has more room for development in the future. From January to September 2016, the total profits of industrial enterprises above the national scale reached 4.63806 trillion yuan, an increase of 8.4% over the same period last year. Large-scale accounts receivable provided a sufficient business basis for the development of factoring. With the increase of accounts receivable, the phenomenon of overdue payments by enterprises is aggravated, and commercial factoring will play a more important role in the future.
Yao Botaibang to increase its holdings, the future development of the company can be expected. Yaobo Taibang, a subsidiary of Zhongzhi, increased its stake in the company in 2016, and as of July 6, Yaobo Taibang had a 15% stake in the company. According to the company announcement, the increase is mainly because Jiangyin Yaobo is optimistic about the company's development prospects, reflecting the confidence in the future development of the company.
Investment advice: buy-An investment rating, 6-month target price of 15.2 yuan. We estimate that the EPS of the company from 2016 to 2018 is 0.41 yuan, 0.54 yuan and 0.59 yuan respectively.
Risk tips: macro risk; credit risk