Incident: On March 29, the company issued the “2016 Annual Results Announcement”. The announcement stated that operating income was 753 million yuan, an increase of 23.64% over the previous year; net profit attributable to shareholders of listed companies was 94.1675 million yuan, an increase of 155.00% over the previous year; basic earnings per share of 0.47 yuan; and a weighted average return on net assets of 11.77%. The company plans to distribute a cash dividend of 1.00 yuan (tax included) for every 10 shares, adding 10 shares. Meanwhile, net profit for the first quarter of 2017 is expected to be around 28 million yuan to 38 million yuan, an increase of 28.33% to 74.16%.
Commentary:
UHV construction is beneficial to the insulator industry. 2016 marks the beginning of the country's 13th Five-Year Plan. China's “13th Five-Year Plan” plan outline indicates that in addition to the 12 transmission channels for air pollution prevention and control, power delivery channels in Southwest China, North China, and Northeast China will be built to achieve coordinated development of power grids at all levels. In implementation, the State Grid Corporation plans to invest 2.7 trillion yuan to build the eastern and western simultaneous power grids by 2020, complete 22 UHV AC and 19 DC projects, and accelerate the upgrading of the distribution grid. The above shows that the overall investment in power grid construction will increase in the next five years, investment allocation will be skewed towards intelligence and higher levels. Electrical equipment companies are facing difficult market opportunities, and the insulator industry is still in a period of promising strategic opportunity. Meanwhile, in 2016, the company successively won bids for 4 routes: Ximeng-Taizhou, Shanghai-Miao-Shandong, Yuheng-Weifang, and Zalut-Qingzhou, with a cumulative amount of about 320 million yuan. It won the bid for 95.8 million yuan of porcelain insulators for the Zarout-Qingzhou UHV project. A total of 4 packages of porcelain insulators were tendered for the Zarout-Qingzhou project. The delivery date was December 30, 2016. At the same time, it was announced on February 3 that it won the bid for China Grid Corporation's 2016 Changji-Guquanshi 1100kV UHVDC transmission line, Qingzhou converter station, Fufeng line and Jinsu line maintenance line material insulators, Linyi converter station-substation project flow label insulators, package 1, package 7 and package 14, and China Grid Corporation's 2017 transmission line material insulators in the first centralized bidding campaign for package 3, package 23 and package 26, with a total bid amount of 300 million yuan. The contract performance of the winning project was compared to the company's business performance in 2017. Make a positive impact. As a leading company in the insulator industry, Dalian Electric Porcelain will fully benefit from the market opportunities brought by UHV construction.
Sales of suspended porcelain insulators and composite insulators have doubled, which is a strong guarantee of high performance growth. Because of their complex production process and huge investment, suspended porcelain insulators have established high technical and financial barriers for the industry, and the entry threshold for the UHV field is even higher; therefore, competition in the high-end market of suspended porcelain insulators, especially in the UHV market, will remain stable for a long time to come. With the rapid development of power construction sites in the country and the rapid rise of glass and composite insulator manufacturers, a competitive pattern for porcelain insulators, glass insulators and composite insulators has now been formed around the world.
Currently, there are only four high-end companies, and the industry standards are high. Judging from the winning bid, Dalian Electric Porcelain has always been in a leading position, which has beneficially guaranteed a high growth in performance.
The actual controller changes, opening up the company's diversification space. In March 2016, the former majority shareholder of the company transferred 40 million shares, accounting for 19.61% of the company's total share capital. The transferee was Funing Yilong Magnetics. Its actual controllers, Zhu Guancheng and Qiu Suzhen, have a number of assets related to rare earth reserves, separation, processing and magnetic material production. Expectations for future business restructuring of listed companies are strong. The company is expected to achieve a parallel model of multiple industries, which will open up space for the company's diversified development.
Profit forecasts. In the context of the continuous release of UHV construction and changes in actual controllers, the company's business scale continues to expand, which is expected to usher in continuous growth. It is predicted that the company's 2017-2018 EPS will be 0.57 and 0.70 yuan respectively, continuing to rate the “increase in holdings”.
Risk warning
UHV construction falls short of expectations