Brief comment on performance
The operating income of Changjiang Investment in the first three quarters of 2016 was 1.135 billion yuan, down 37.2 percent from the same period last year, and the net profit attributable to shareholders of listed companies was 125 million yuan, up 56 percent from the same period last year.
Business analysis
The supply chain management business led to a sharp decline in revenue and an increase in gross profit margin: the company's revenue in the first three quarters fell 37.2% from the same period last year, mainly due to a decrease in revenue from the supply chain management business of logistics enterprises. Since the gross profit margin of the business is only 3%, the decline in its share has caused the company's overall gross profit margin to rise to 16.6% from 8.2% in the same period last year. At the same time, the operating performance of logistics enterprises was lower than expected, and the company accounted for the asset impairment loss, resulting in an asset impairment loss of about 13.5 million yuan higher than the same period last year.
The metal trading center contributed to high performance growth: the company's high performance growth in the first three quarters was mainly due to a substantial increase in investment income. In the same period last year, 60 million of the investment income was the income obtained from the one-time transfer of instrument and electricity technology shares. Excluding the impact of the project, the investment income of the current period increased by about 100 million yuan compared with last year. Changjiang United Metal Trading Center, which is 40% owned by the company, contributes most of the increase in investment income; it contributes 14 million yuan in profit in the first quarter of this year and about 40 million yuan in the second quarter, showing an upward trend and is expected to contribute 150 million yuan in profit for the whole year. The sharp increase in the performance of the metal trading center was mainly due to the boom in the commodity trading market in the first half of the year.
Additional subscription for M & A fund share, investment in Changwang Science and Technology plans to enter the military industry: the company announced in September to increase the investment to 300 million yuan as a partner to set up a 500 million yuan M & A fund "Fenyi Changxin Huizhi Asset Management Partnership (limited partnership)". The main way of investment is to invest in key industries and enterprises with competitive advantages and good development prospects in the form of equity investment. Subsidiary Changwang Technology has landed on the new third board, mainly engaged in high-altitude detection, ground detection sensors, detection system research and production. Changwang Technology plans to acquire 100% stake in Zhongtian Rocket, which belongs to the Aerospace Power Technology Research Institute, and has strong R & D capabilities. Changwang Technology has profound manufacturing experience and will complement each other's advantages.
Profit adjustment
We estimate that the EPS of the company in 2016-18 will be 0.63 RMB 0.77 RMB per share.
Investment suggestion
The Changjiang United Metal Trading Center, which is 40% owned by the company, greatly exceeded expectations. The logistics business takes Lujiao Center as the core and creates a wisdom circulation platform. Changwang Technology, a subsidiary, intends to acquire Zhongtian Rocket, which has a good momentum of development. Given that share prices have risen sharply to reflect expectations, a "overweight" rating is given.
Risk
The compliance risk of the metal trading center and the risk of declining trading volume, the risk of fierce competition in the industry, and so on.