Events:
On April 14, Shenwu Energy Saving released the 2016 results KuaiBao and the first quarter of 2017 results forecast, 2016 and the first quarter of 2017, the company achieved beautiful growth.
X2016 performance KuaiBao: in 2016, the company is expected to achieve operating income of 870 million yuan, an increase of 32% over the same period last year; operating profit of 390 million yuan, an increase of 97% over the same period last year; and net profit attributable to 330 million yuan, an increase of 95% over the same period last year. The corresponding total share capital of 637 million shares EPS is 0.52 yuan per share, the performance is in line with expectations.
First quarter 2017 performance Forecast: in the first quarter of 2017, the company is expected to achieve a net profit of 660 million to 77 million yuan attributable to shareholders of listed companies, an increase of 52% to 77% over the same period last year.
Comments:
1. Stock projects continue to promote income growth in 2016 and the first quarter of 2017, and the 2016 net interest rate exceeds market expectations. We expect that on the one hand, it is related to the exclusive advantage of technology, on the other hand, it may be related to the settlement of overseas projects with high gross margin.
In 2016, the company is expected to achieve operating income of 870 million yuan, an increase of 32% over the same period last year; operating profit of 390 million yuan, an increase of 97% over the same period last year; and net profit attributable to 330 million yuan, an increase of 95% over the same period last year, with a total share capital of 637 million EPS of 0.52 yuan per share. In the first quarter of 2017, the company is expected to realize a net profit of 660 million to 77 million yuan attributable to shareholders of listed companies, an increase of 52% to 77% over the same period last year. In terms of growth, Shenwu's energy-saving performance has achieved rapid growth in 2016 and the first quarter of 2017. This is related to the continuous progress of the company's Jinchuan Phase I, Indonesia River and other stock projects.
What is more noteworthy in the performance of KuaiBao is the higher-than-expected net interest rate of the company. In 2016, the company achieved operating income of 870 million yuan, corresponding to a net profit of 330 million yuan, with a high net interest rate of 38%. We believe that the company's high profitability in 2016, on the one hand, is related to the company's exclusive technological advantages; on the other hand, among the major projects settled by the company in 2016, overseas projects such as the Indonesian River are expected to account for a large proportion of income. the profit margins of overseas projects are often high, thus driving the company to achieve a high net interest rate of 38% in 2016 as a whole.
Judging from the future trend, due to the company's exclusive technological advantages, the company is expected to maintain a high net interest rate that exceeds the average level of the environmental protection industry. According to the conservative principle, we assume that with the increase in the proportion of domestic project settlement, we expect the company's profit level to fall at 38% net interest rate. For 2017 and 2018, our profit model assumes that the company's comprehensive net interest rate is about 20%. 25%.
2, there are plenty of orders on hand, and the continuous promotion of stock projects will ensure the rapid growth from 2017 to 2018.
At present, Shenwu Energy Saving has more than 10 billion on-hand orders, and it is expected that a large number of new orders will be realized in 2017 after the launch of the Jinchuan project in December 2016. Only from the existing stock projects, the normal progress will also ensure the company's rapid growth in 2017-2018. We expect that in 2017-2018, the company will achieve operating income of 3.146 billion yuan and 5.541 billion yuan respectively. The specific project settlement progress is shown in Table 1 below.
3, the market space is huge, after the new chairman takes office, Shenwu Energy Saving has greater potential for deep cooperation with Baowu Group and large customers in the iron and steel field. Sustained high growth in performance will quickly digest the valuation and maintain the "" rating, with a target price of 60.99 yuan.
Shenwu's main energy-saving business includes three pieces: comprehensive treatment of large industrial solid wastes such as steel slag, clean smelting of low-grade mineral resources and energy-saving and environmental protection process reengineering in ironmaking. Its main customers are concentrated in the field of iron and steel metallurgy. On March 30, 2017, Shenwu issued an announcement on energy conservation, electing Mr. Song Bin as the new chairman. Mr. Song Bin has been working in Baosteel Group since he graduated from the Department of Metallurgical Machinery of Anshan Iron and Steel Institute in 1994. More than 20 years of working experience in Baosteel Group has accumulated valuable group management experience, but also accumulated sufficient contacts in Baosteel Group and the iron and steel industry. In the future, the business implementation and market development prospects of Shenwu energy saving will be clearer.
If we say that Shenwu environmental protection is the technological subversion of petrochemical process, Shenwu energy saving is the technological revolution of metallurgical production process, and its production process can solve many world-class problems in smelting, such as low grade ore smelting, slag utilization, low calorific value gas shaft furnace ironmaking and so on. According to China's current consumption of crude steel, nickel, vanadium, titanium, chromium, iron and solid waste, there is 3.2 trillion market space for clean smelting energy-saving technology in China. And corresponding to the whole world, there is 6.4 trillion space for technological transformation, and Shenwu has a huge long-term space for energy conservation.
According to our forecast for the progress of the project, we expect the company to achieve revenue of 3.146 billion yuan and 5.541 billion yuan respectively, and corresponding attributable net profit of 630 million yuan and 1.11 billion yuan respectively from 2017 to 2018. Judging from the net interest rate level of KuaiBao, the company's net profit from 2017 to 2018 may also exceed our previous expectations. In the future, with the high degree of technological leadership, the company will enjoy a trillion-dollar market for a long time, driving sustained high growth and rapid digestion of valuations. Taking into account the company's market space, performance certainty, growth and other three aspects, we slightly increase the company's one-year target valuation to 2018 35 times PE, corresponding to 38.9 billion market capitalization, corresponding to the one-year target price of 60.99 yuan, maintaining the "highly recommended-A" rating.
4. Risk hint: the risk that the project schedule is lower than expected, market risk.