Event

The company releases the third quarter report of 2016

The company achieved operating income of 1.301 billion yuan in the first three quarters, an increase of 0.62% over the same period last year. The net profit returned to the mother was-45 million yuan, deducting non-net profit-74 million yuan, and basic earnings per share-0.04 yuan. Among them, the operating income in the third quarter was 429 million yuan, the net profit was-39 million yuan, the non-net profit was-37 million yuan, and the basic earnings per share was-0.04 yuan.

Brief comment

The increase in expense rate and the reduction of subsidies lead to an increase in loss in a single quarter.

The company's operating income in the third quarter increased by 3.87% compared with the same period last year, slightly down 1.88% from the second quarter, while the net profit was-39 million yuan, compared with the loss of-16 million yuan in the second quarter. Compared with the second quarter, the company's sales gross profit margin changed little, the third quarter sales gross profit margin of 11.64%, an increase of 0.54 percentage points compared with the previous quarter. On the other hand, the sales expense rate (7.55%) and the management expense rate (12.11%) increased by 0.78 percentage points and 1.72 percentage points respectively from the previous quarter, resulting in an increase in non-net profit quarter-on-quarter losses in the third quarter. In addition, the company had more non-operating income (mainly government subsidies) in the first two quarters, and the non-operating income in the third quarter decreased sharply by more than 1700 yuan compared with the second quarter, which also led to a substantial increase in the company's quarter-on-quarter net profit compared with the third quarter.

Increase for major shareholders, the company aims at green and healthy industrial chain

The company just released the latest version of the non-public offering plan on October 22, which is only for major shareholder Zhejiang Ruikang Investment Co., Ltd., and its shareholding will increase from 10.82% to 32.05% after the completion of the fixed increase. The funds raised in this non-public offering will be used for the technical renovation project of the biological and fermentation high-tech park, the project of plant nutrition and soil remediation products with an annual output of 300000 tons, the fourth generation condiment and high-end health food project and the repayment of loans. Through this non-public offering, the company will further expand and improve the green and healthy industrial chain, enrich the green product structure, and build a diversified intelligent agricultural industry strategy.

Debt restructuring is finally implemented, and the company is expected to turn losses into profits for the whole year.

The company and the Xiangcheng branch of ICBC reached an agreement on debt restructuring, the company returned 178135498.00 yuan of funds on October 9, the Xiangcheng branch of ICBC will write off the remaining principal and interest, and the claims and debts of both parties have been terminated. Through this debt restructuring, the company generates an income of 253935480.81 yuan, which will have a positive impact on the company's annual net profit. The company lost 508 million yuan in net profit last year, and its operation has improved significantly this year, reducing the loss to-45 million yuan in the first three quarters. Through this debt restructuring, the company is expected to turn losses into profits for the whole year.

The industry concentration will continue to improve, and the company will enhance its competitiveness in an all-round way.

From 2002 to now, the state has issued a number of related industry policies to eliminate the backward production capacity of monosodium glutamate and promote industrial integration and upgrading. After the regulation and control of national macro policies in recent years, a large number of small and medium-sized monosodium glutamate production enterprises that do not meet the standards or have hidden dangers of environmental pollution have been eliminated, monosodium glutamate production enterprises have gradually decreased, and the industry concentration has been increasing. As the largest production and export base of monosodium glutamate and wheat gluten in China, the company will transform the existing technology and equipment with the help of funds obtained from additional issuance and debt restructuring, so as to improve production efficiency, reduce production costs and enhance the company's core competitiveness. to achieve the sustainable development of a green and healthy industrial chain.

Profit forecast and valuation

We are optimistic about the continuous improvement of the company's main business performance in the future, as well as the company's long-term layout in the green and healthy industrial chain. The company is expected to turn a profit this year. Target price 6.50 yuan, increase the rating.