Main points of the report
Event description
The company today released its annual report for 2016 and its first quarterly report for 2017. revenue for the whole year of 2016 was 749 million yuan, an increase of 23.91 percent over the same period last year, and a net profit of 47 million yuan, down 10.39 percent from a year earlier. The net profit for the first quarter of 2017 is expected to be 111.21 to 1.4457 million yuan, an increase of 0.30 percent over the same period last year.
Event comment
The company's net profit fell in 2016, mainly due to a sharp increase in expenses. 1) the company's operating income continued to grow steadily: in terms of business, membrane engineering revenue increased by 20.49% year-on-year, becoming the main source of revenue growth; membrane product sales and sewage treatment technical service revenue increased by 15.42% and 228.71% respectively compared with the same period last year. The income of the company's membrane products is relatively high, and the production capacity of the new automatic production line has increased, and the increase in the output of membrane products is another reason for revenue growth. 2) in terms of expenses, the company's short-term borrowing at the end of 2016 was 466 million yuan, an increase of 22.73% over the same period last year. The increase in bank loan interest expenses led to an increase of 9.178 million yuan in financial expenses, an increase of 53.06% over the same period last year. 3) in terms of profitability, increased competition in the industry led to a decline in the gross profit margin of the company's membrane engineering, membrane products and sewage treatment technical services by 0.99,1.56 and 16.63 percentage points respectively compared with 2015, which further aggravated the decline of the company's performance. 4) in addition, the company's R & D expenses increased by 6.85 million yuan, resulting in a 12.86% year-on-year increase in management expenses and a 14.26 million yuan reduction in government subsidies.
The company actively seeks multi-field expansion and business model innovation. The company used to take membrane products as the core driver, and the integration of investment and operation under the promotion of ppp mode has become a trend. the company followed the major trend and began to promote "product + engineering" two-wheel drive. From a sub-field point of view, the company began to expand into municipal, industrial, printing and dyeing, petrochemical, coal chemical, seawater desalination and other market segments, and contracted large-scale water resources projects. In terms of business model, the company has gradually developed to new models such as PPP, BOT, BOO and EPC under the original sales model, and has successively undertaken the EPC project of the sewage treatment plant in Xi'an Weibei Industrial Park, the PPP project of the sewage treatment plant and its supporting pipe network project in Ningxiang Economic and technological Development Zone, and the EPC project of the second sewage treatment plant in Shanghai Jinshan Industrial Zone. In addition, the company actively invested in research and development to maintain technological innovation, developed products for brackish water desalination in 2016, and built an annual production capacity of 400000 square meters of hollow fiber reverse osmosis membrane production line, the future is worth looking forward to.
Profit forecast and investment advice: considering the fixed increase of dilution (consolidation and dilution in 2017), we estimate that the company's EPS in 2017-2019 is 0.51,0.69,0.85 respectively, and the corresponding PE is 34x, 25x, 20x respectively, maintaining the "buy" rating!
Risk tips: 1. The return of membrane engineering project is less than the expected risk.
