Core viewpoints
Brief comments on the performance of the annual report
The company released its annual report on March 14, with operating income of 15.127 billion yuan in 2016, an increase of 16.46 percent over the same period last year, and a net profit of 266 million yuan belonging to shareholders of listed companies, an increase of 65.52 percent over the same period last year. The company intends to distribute a cash dividend of 0.90 yuan (including tax) to all shareholders for every 10 shares, with a total cash dividend of 81474167.79 yuan (accounting for 30.66% of the net profit attributed to shareholders of listed companies in 2016). At the same time, the capital reserve will be transferred to all shareholders of the company by 3.5 shares for every 10 shares, with a total increase of 316843985 shares.
Comments:
With the rapid growth of performance, the brand advantage is highlighted. The growth rate of the company's performance is better than the average level of industry growth. First, the company's brand image has been fully recognized by the market, and second, the company's three-dimensional marketing system has achieved initial results, realizing the grasp of the main market, the in-depth development of the regional market, and the breakthrough of the high-end equipment market. The company's sales of power equipment cable products with high gross margin increased by 57.13% year-on-year, and the company's revenue in the southern region increased by 230.51% year-on-year. We believe that the company will continue to increase sales of products with high gross margins this year and is expected to maintain rapid and steady growth this year.
Advance the high-end market and open the mode of mergers and acquisitions. We believe that the cable industry is bound to move from decentralized to centralized, and enterprises with poor competitiveness will be eliminated by the market. The company has successively implemented a number of strategic restructuring and cooperation projects nationwide, such as Shanghai Anjie, Sichuan Jinrui Electrical Engineering, Baosheng (Ningxia), Shanghai Yalong and so on, and carried out industrial layout in China. Recently, through the acquisition of 51% stake in Changzhou Jinyuan Copper Co., Ltd., it has quickly entered the field of high-end special precision conductors such as high-end electromagnetic wires and enamelled wires; at the same time, it helps the company to develop special high-end cable business such as aerospace conductors. so that the company's core competitiveness in the high-end cable market has been continuously improved.
Group platform advantage, hitchhiking "Belt and Road Initiative". We believe that with the support of AVIC, the company has the dual advantage of "market + capital". On the one hand, the use of e-commerce, to further consolidate their leading position in the aviation cable industry, to achieve online sales of nearly 80 million yuan. On the other hand, hitchhiking "Belt and Road Initiative" successfully won the order of 200 million yuan from Singapore Electric Power Bureau, with exports of 505 million yuan for the whole year, including 455 million yuan for direct exports. At the same time, strengthen close contact with central enterprises and regional leading enterprises, strengthen in-depth cooperation with foreign agents, the company has established overseas offices in the Middle East, expanded foreign trade channels, and enhanced its ability to participate in international market competition.
Investment advice: the annual report results exceeded expectations, and we re-calculated the company's performance from 2017 to 2019. Taking into account the market demand for the company's products in 2017, we estimate that the operating income in 2017, 2018 and 2019 will be 17.068 billion yuan, 19.174 billion yuan and 21.373 billion yuan respectively, with year-on-year growth rates of 12.83%, 12.34% and 11.47%, respectively. The net profits of shareholders belonging to the parent company were 351 million, 435 million and 508 million respectively, with year-on-year growth rates of 32.26%, 23.76% and 16.78% respectively. Taking into account the company's equity conversion, the corresponding EPS was 0.38,0.48 and 0.56 yuan respectively. Taking into account the new aviation market demand and special cable market in the future, and the company is the only aviation cable supply platform of AVIC, as well as the valuation of equipment in the entire military industry, the 30x PE in 2017 is given a target price of 11.40yuan after conversion, corresponding to the current target price of 11.53. at present, the share price implies a 31.12% increase. Maintain the buy rating.
Risk Tips:
1) the progress of domestic large aircraft is not as expected, and the demand growth in the aviation market is slow.
2) the company's high-end products lag behind
3) Macroeconomic downturn and lower-than-expected demand for power cables
4) systematic risk appears in the stock market.