Main points of investment:
The attributable net profit in 2016 was 259 million yuan, an increase of 90.81% over the same period last year. During the reporting period, the company realized revenue of 4.876 billion yuan, an increase of 28.02% over the same period last year; net profit belonging to the owner of the parent company was 259 million yuan, an increase of 90.81% over the same period last year; and basic earnings per share was 0.38 yuan. Of this total, 4Q2016 realized revenue of 1.4 billion yuan, an increase of 38.07% over the same period last year; net profit attributable to 58 million yuan, an increase of 28.89% over the same period last year; and basic earnings per share of 0.09 yuan. The substantial increase in the company's performance is mainly due to the substantial increase in the price of viscose staple fiber, the company's reduction in cost and expenditure, and the increase in gross profit during the reporting period.
Viscose staple fiber prices rose sharply, leading to the improvement of the company's performance. In 2016, the company sold a total of 257900 tons of viscose staple fiber, an increase of 25.37% over the same period last year. Compared with the steady growth in sales, the company achieved a revenue of 3.219 billion yuan for viscose staple fiber, a sharp increase of 40.30% over the same period last year, while the gross profit margin fell slightly by 0.63 percentage points to 13.12% due to the structural adjustment of major raw materials. The substantial increase in revenue was mainly due to the rise in product prices. During the reporting period, the price of viscose staple fiber rose from a peak of about 13000 yuan / ton at the beginning of the year to about 17000 yuan / ton, leading to an improvement in the company's performance. At the same time, the company announced that Funing Aoyang intends to invest in the construction of 160000 tons / year differential viscose project, actively adjust the company's product structure, and timely eliminate backward production capacity. We judge that although the price of short-term viscose staple fiber has a correction, but the range will not be too deep, as the product prices of replenishment demand in the lower reaches of April are expected to rise again, the industry will continue to be in a tight balance between supply and demand in 2017, and the economy will remain high.
The medical and health industry has grown steadily, and the contribution of profits has increased steadily. In 2016, the company realized medical logistics revenue of 955 million yuan, an increase of 14.39% over the same period last year; medical service revenue of 697 million yuan, an increase of 2.52% over the same period last year; and opened up health management business with revenue of 5.24 million yuan. We judge that with the gradual opening of Zhangjiagang Port City Rehabilitation Hospital, Xuzhou Aoyang Huaan Rehabilitation Hospital, Huzhou Aoyang Rehabilitation Hospital and the increasing demand for services in the medical and health industry, the company's performance in the field of medical services will maintain a steady growth trend.
Profit forecast and valuation. We estimate that the company's EPS from 2017 to 2019 will be 0.55,0.64,0.68 yuan per share respectively. As the company has a medical services business, we will comprehensively consider giving the company a dynamic price-to-earnings ratio of 20 times dynamic earnings in 2017 and a six-month target price of 11 yuan, maintaining the "overweight" rating.
Risk hint. Viscose prices fell, medical services business expansion was lower than expected, macroeconomic decline.