Investment suggestion
We predict that the EPS of the company from 2017 to 2019 is 0.10,0.11 and 0.11 yuan respectively, and the corresponding PE is 164,156,144 times respectively. The company's main business is industrial computer control systems, electric drives, industrial testing and control instruments and other related products in the field of industrial automation, which has been under pressure for many years under the influence of overcapacity in the downstream iron and steel industry. To this end, the company is actively expanding the field of product application and strengthening market development. In view of the small market capitalization of the company, the main business still has the strength to maintain the "recommended" rating.
Main points of investment
Revenue dropped slightly and gross profit margin increased significantly: in 2016, the company achieved operating income of 465 million yuan, down 13.27 percent from the same period last year. Net profit belonging to shareholders of listed companies was 16.83 million yuan, an increase of 9.12 percent over the same period last year. The decline in revenue is mainly due to the overall downturn in the iron and steel industry, and the demand for metallurgical automation products has been greatly reduced. The increase in net profit was mainly due to a significant increase in gross profit margin on sales, which was 30.62% in 2016 and 22.13% in 2015. The company's sales expenses in 2016 were 21.32 million yuan, an increase of 13.48 percent over the same period last year; management expenses were 73.79 million yuan, an increase of 5.49 percent over the same period last year; and financial expenses were-21.9 million yuan, a decrease of 67.59 percent over the same period last year, mainly due to a reduction in interest expenses. The net cash flow of business activities was-65.14 million yuan, a sharp decrease of 392.14% compared with the same period last year, mainly due to the decrease in cash received from the sale of goods and services and the increase in cash paid for goods and services in 2016. Expenditure on R & D was 38.13 million yuan, down 11.72% from the same period last year.
There is still obvious overcapacity in the downstream steel market, and the company's performance is still under pressure: the company's main business is the development, production, sales and undertaking of industrial automation engineering and technical services related to the three electric industries, such as industrial computer control systems, electrical drives, industrial testing and control instruments, and so on. More than 85% of the company's main business and customers are concentrated in the iron and steel industry. In 2016, although the state has stepped up its policy on supply-side reform and steel capacity reduction, the contradiction of steel overcapacity has accumulated for a long time and cannot be resolved in a short time. At the same time, steel production capacity in developed countries has been saturated, countries along the "Belt and Road Initiative" routes such as Africa, Southeast Asia and Central Asia are increasing investment in their own steel, and there are many anti-dumping investigations into steel product exports. as a result, domestic steel product exports declined for the first time in 2016 after rapid growth. Therefore, the contradiction of steel overcapacity in 2016 is still prominent. Although the price of steel products is better than that in 2015, the steel market has not fundamentally improved. The decline in demand and capacity removal policy in the steel industry are still great pressure on the company's performance growth.
Expand the field of product application and attach importance to market development: in view of the current over-concentrated industry dependence, according to the development strategy of "based on the metallurgical field, making full use of strategic alliance and capital operation means, and implementing business expansion", the company continues to launch serialized products of the three power industries, enhance the technical strength of our products and services into other industries, and expand the scope of foreign cooperation. Thus, the technology and products of the three power industries in the field of industrial automation can be applied to many industries such as light industry, petrochemical, construction, building materials and environmental protection as far as possible, increase the market share in other industries, and constantly expand the living space of the company. to maintain the long-term sustained and stable development of the enterprise. Moreover, in order to adapt to the industrialization development of the company's production and operation, the company has made clear the basic principle of market operation, which is "oriented to meet market demand and focused on improving service quality", and the market is divided by region.
The company has also specially formulated a series of systems such as "Marketing Management system" and "contract Management measures" to ensure that the company is institutionalized and standardized in market development. In order to improve the overall quality of the marketing team, the company also regularly carries out all-round training for marketing personnel, so that they can constantly improve their management skills, sales skills, market awareness, business ability and so on. At the same time, the company promotes the market development and marketing network construction to the core position, trying to establish a marketing center, more offices and other measures to fully open up the market.
Risk hint: downstream metallurgical industry demand continues to slump, accounts receivable bad debts.