Events:
The company's total operating income in 2016 was 825 million yuan, an increase of 0.81 percent over the same period last year, and the net profit attributed to shareholders of listed companies was 21 million yuan, a decrease of 56.32 percent over the same period last year. The income per share was 0.06 yuan, a decrease of 57.14% compared with the same period last year, 0.15 yuan for every 10 shares (including tax), and 0 shares for every 10 shares.
Viewpoint:
Operating income increased slightly and increased significantly in the fourth quarter. In 2016, the company achieved a total operating income of 825 million yuan, an increase of 0.81% over the same period last year. The slight slowdown in revenue growth is mainly due to the company's delayed construction of relevant projects, delayed execution of orders for major products, delayed revenue recognition and other factors. In terms of products, newly signed orders for concrete pipe projects increased significantly in 2016, with concrete pipe sales up 40.08% year-on-year to 457.55KM, with business income of 427 million yuan, up 2.66% over the same period last year; plastic pipe sales decreased by 25.70% to 36699 tons, achieving operating income of 3.62%, down 9.50% from the same period last year; and the company's new micro-loan business achieved revenue of 36 million yuan. From a sub-regional point of view, the northwest region accounted for a large proportion, with revenue of 618 million yuan, but down 9.20 percent from the same period last year; sales revenue in North China increased significantly, rising 35.64 percent to 161 million yuan compared with the same period last year. Of this total, operating income reached 352 million yuan in the fourth quarter, an increase of 25.97 percent over the same period last year.
The company's gross profit margin was 29.98%, a decrease of 0.50 percentage points, mainly due to the increase in the price of raw materials and labor wages. Among them, the gross profit margin of concrete pipes increased by 1.75 percentage points to 34.80%, the gross profit margin of plastic pipes decreased by 5.55 percentage points to 24.29%, and the micro-loan business achieved a gross profit margin of 100%. During the period, the expense rate increased by 2.29 percentage points to 25.89%. Among them, the increase in bidding service fees led to an increase of 0.16 percentage points in the rate of sales expenses to 10.40%; the increase in start-up costs and R & D expenses increased the rate of management expenses by 0.75 percentage points to 13.23%; the increase in loan interest and the decline in bank deposit income over the same period last year increased the financial expense rate by 0.33 percentage points to 1.14%. Asset impairment losses rose 2.02 percentage points year-on-year to 4.87%, mainly due to receivables and Azure Dragon's provision for impairment of foreign loans. The company's net interest rate fell 2.94 percent to 2.79 percent in 2016, making a net profit of 23 million yuan. The cash flow of operating activities increased by 35.87% over the same period last year to 173 million yuan, mainly due to the increase in sales rebate and interest income.
New orders signed in 2016 will be released in 2017 to ensure performance growth. With the implementation of the national water conservancy reform and development plan, new urbanization construction planning and other policy planning, as well as the in-depth implementation of "Belt and Road Initiative" and the western development strategy, the company is located in the northwest region, with geographical advantages and policy support advantages. In 2016, the newly signed contract amount of the company was 2.035 billion yuan, including 1.53 billion yuan for concrete pipes and 505 million yuan for plastic pipes, and the contract amount carried forward to next year was 1.631 billion yuan, including 1.477 billion yuan for concrete pipes and 154 million yuan for plastic pipes. This lays a good foundation for the further development of the company.
Small and medium-sized loan business began to release performance, while actively expanding new profit growth points. In 2016, the company's small and medium-sized loan business achieved operating income of 36.14 million yuan, due to zero operating costs, the contribution to the company's performance gradually began to appear. In the future, with the expansion of the scale of the company's small and medium-sized loan business, the contribution to the company's performance will gradually increase and become a new profit growth point of the company. At the same time, the company is also actively exploring new profit growth points, such as applying for private banks.
Earnings forecast and investment rating: the company is expected to earn 0.37,0.55 and 0.70 yuan per share from 2017 to 2019. Based on the closing price of 10.78 yuan, the corresponding dynamic PE is 29, 20 and 15 times. Taking into account the company's 2017 performance entered the release period of stable performance growth and the company is actively exploring new profit growth points, to maintain the company's "highly recommended" investment rating.
Risk Tip: the situation of new bidding projects in 2017 is lower than expected.