Summary of the report:
Event: Hua Pengfei released the 2016 annual report, the company achieved operating income of 696 million yuan, down 10.47% from the same period last year, the net profit of shareholders belonging to listed companies was 132 million yuan, up 54.59%, corresponding to EPS of 0.44 yuan, an increase of 15.79% over the same period last year.
Comments:
The company significantly reduced the sales of processed and manufactured products and commodity sales in the supply chain, and the strategic adjustment led to a slight decline in revenue. The company's operating income reached 696 million yuan in 2016, down 10.47% from the same period last year, mainly because the company shifted the focus of business development to mobile information services and began to significantly reduce the sales of processed manufacturing products and supply chain goods. Of this total, the operating income of the processing and manufacturing products sales business reached 65.8727 million yuan in 2016, down 70.69% from the same period last year, while the supply chain commodity sales business reached 5.5187 million yuan in 2016, down 90.32% from the same period last year.
The company's net profit increased significantly, mainly due to the increase in the proportion of revenue from the two high-margin businesses, smart mobile services and mapping and data product sales, which led to an increase in gross profit margin. The company achieved a net profit of 132 million yuan in 2016, up 54.59% from the same period last year, mainly because the company began to develop two high-margin businesses: smart mobile services and the sales of surveying and mapping and data products. Of this total, smart mobile services contributed 246 million of revenue, accounting for 35% of revenue from 22% in 2015, while sales of surveying and mapping and data products contributed 75.1 million yuan to newly acquired businesses in 2016, accounting for 10.8% of revenue.
Through the acquisition of Hongtu Development by subsidiaries, the layout of intelligent mapping, the construction of a "big logistics" platform supply chain integration ecosystem. On October 27, 2016, Bo Han Weiye, a wholly-owned subsidiary of the company, purchased a 51% stake in Liaoning Hongtu Chuangzhang surveying and surveying Co., Ltd with its own capital of 336.6 million yuan. Hongtu Chuangzhang began to be included in the merger of the company in November 2016, contributing 75.1005 million yuan in income, accounting for 10.8% of income and 19.6359 million yuan in net profit.
Investment suggestion: the company opens the large logistics strategy through the acquisition of Bo Han Weiye and Hongyi Chuangzhan. In the future, high-end supply chain management and logistics financial services will become the company's profit point. We expect the company's EPS to be 0.68,0.75 and 0.78 yuan respectively in 2017-2019, corresponding to PE as 33X/30X/29X, respectively, giving "overweight" rating.
Risk hint: competition in the logistics sector intensifies, and the performance of subsidiaries is lower than promised.
