2016 Annual report exceeded expectations

Aoyang Technology announced its 2016 results: operating revenue was 4.876 billion, up 28% from the same period last year; net profit attributable to the parent company was 259 million, up 91% from the same period last year, corresponding to earnings per share of 0.38 yuan, slightly exceeding our expectations. During the reporting period, the volume and price of the company's viscose staple fiber products rose, the health care business developed steadily, and the management expenses and financial expenses decreased, resulting in beautiful performance.

Trend of development

First-quarter net profit is expected to be 4400-60 million, up more than 50% from a year earlier. At present, the price of viscose staple fiber is 17420 yuan / ton, an increase of 29% over the same period last year. At the same time, the company further optimizes the process and saves money, develops differentiated fiber varieties, and further enhances its profitability.

The supply and demand structure of viscose staple fiber has improved, and the volume and price of products have risen. Since 2015, the viscose industry has stopped production structurally due to environmental protection, the supply and demand structure has significantly improved, the price bottom has warmed up, and the future new production capacity is limited. The 16-year average price has risen 13.8% compared with the same period last year, and the annual growth rate of downstream demand has been stable at about 5%. The company has a production capacity of 300000 tons of viscose staple fiber, leading in the industry, with a certain scale advantage and high performance elasticity. At the same time, Funing Aoyang, a holding subsidiary, plans to invest in the construction of 160,000 tons / year differential viscose project, which will further improve the company's product structure and enhance the profitability of viscose staple fiber.

The layout of the large healthy industrial chain tends to be improved, two-wheel drive, and profits are growing steadily. During the reporting period, the company's four general hospitals have been in operation, opening 2200 beds, and at the same time, with Zhangjiagang as the center, set up a chain network of rehabilitation medical services in East China, focusing on the development of rehabilitation medicine and interacting with the other three branches. In the future, the company will speed up the realization of remote replication through the chain of rehabilitation hospitals.

Profit forecast

We have lowered our 18-year earnings per share forecast for 2017 by 23% from 0.64 per cent to 0.48 per cent from 0.64 per cent to 0.57 per share, respectively.

Valuation and suggestion

At present, the company's stock price corresponds to 2017 Universe 18-year 22-pound 19x Pax E. We maintain the recommended rating, but lower the target price to 12.8 yuan, which is 20% upside from the current share price, corresponding to the 2017 Universe 18-year 27ap22x Pmax E.

Risk.

The price of viscose fell; the development of big health business was not as expected; the valuation center moved down.