Main points of investment
Event: the company released its 2016 annual report, with operating income of 1.273 billion yuan, an increase of 3.41% over the same period last year, and a net profit of 390 million yuan, down 9.12% from the same period last year. The performance is in line with market expectations and plans to distribute 1.0 yuan (including tax) for every 10 shares. Miki Intelligence (not consolidated) achieved a net profit of 110 million yuan in 2016, deducting 106 million yuan in net profit, exceeding the 2016 performance commitment target.
The performance is in line with market expectations, and the turnround effect drives the steady growth of highway business: the company's revenue maintained steady growth in 2016, and the slight decline in net profit was mainly due to the increase in net profit due to the recognition of deferred income tax assets in 2015. After deducting this effect, the company's net profit in 2016 increased by 22.42% compared with the same period last year, maintaining a rapid growth trend. Considering that the Dasuo and Huangxian section is still in the stage of loss due to the influence of the broken road and other factors, we estimate that the total annual loss is about 180-200 million yuan. At present, the upper and lower reaches of the Dasui and Huangxian section are gradually under construction, and the two loss-making lines are expected to reverse losses of more than 60 million yuan a year. At the same time, with the steady growth of about 3-5% a year in the Hanyi section, the company's traditional business is expected to maintain an average annual growth rate of more than 15% in the future.
Miki Intelligence has slightly exceeded the performance commitment for 16 years, and the follow-up is expected to continue to exceed expectations: Miki Intelligence achieved a net profit of 110 million yuan in 2016, significantly exceeding the performance commitment target of 98 million yuan. We believe that Miki Intelligence, as the first batch of professional ODM manufacturers of mobile phones, tablets and other electronic products in China, has a deep accumulation of technology. in the early stage, because its cash flow and the company's business strategy are conservative, it mainly works in overseas markets, and the corresponding shipments are only a few million, compared with the annual shipments of more than 500 million units of global ODM manufacturers, the proportion is very low, and the growth space is extremely large.
Chutian Expressway has now completed the acquisition, low-cost financial support will be in place one after another, Miki Intelligence will strengthen the development of the domestic market, rely on major customers to build boutique models, and achieve explosive growth in the domestic market. At the same time, combined with the company's layout in overseas markets and Internet of things, coupled with a good incentive mechanism, Miki Intelligent performance is expected to continue to exceed the performance commitment.
The company is determined to deepen the reform and transformation, and the expectation of subsequent epitaxial mergers and acquisitions is strong: due to the limitation of highway business tolls, the company has been hoping to open up a second main business. In 2016, the first epitaxial M & A landed, and the electronics industry was chosen as the starting point. The company's annual report clearly proposed that it will pay close attention to Miki intelligent upstream and downstream enterprise expansion, regional expansion, channel collaborative product development and other industry extension opportunities. Looking for opportunities to continue to implement industrial mergers and acquisitions or equity investment, follow-up epitaxial mergers and acquisitions are expected to be strong.
Investment advice: with an average annual growth rate of more than 15% in traditional business, Miki's intelligent performance is expected to continue to exceed expectations. We expect the company's annual net profit in 2017-18-19 to be 6.01max 7.86 / 943 million yuan, with a growth rate of 53%, 31%, 20%, and diluted EPS of 0.35, 0.45, 0.54, 20 times and 40 times, respectively, corresponding to the target price of 8.67 yuan. Overlay potential extension expectations and maintain a "buy" rating.
Risk hint: the traditional main business loss line reversing loss range is low expected; Miki intelligent customer expansion progress is low expected.