Hyundai Investment publishes its 2016 annual report. In 2016, the company achieved an operating income of 9.524 billion yuan (+ 46.2%), a gross profit margin of 17.0% (- 3.8pct), a net profit of 822 million yuan (+ 45.0%) belonging to the parent company, and an EPS of 0.81 yuan. The company plans to pay a cash dividend of 0.5 yuan (including tax) for every 10 shares and increase 5 shares for every 10 shares in the capital accumulation fund.

Gross profit margin fell due to rising income from commodity trade. The company's revenue reached 9.524 billion yuan in 2016, an increase of 46.2% over the same period last year, mainly because the company's spot trade in commodities rose 86.0% year-on-year to 6.661 billion yuan in 2016. However, due to the low gross margin of spot trade in commodities, and its revenue accounted for 69.9% of the company's total revenue, the company's gross profit margin eventually fell by 3.8% to 17.0%.

The pattern of "one body and three wings" has basically taken shape. According to the disclosure information announced by the company, in 2016, the company gradually expanded its business in the financial sector, investing in Changsha, Xiangtan Tianyi, Lixian and Anxiang Agricultural and Commercial Banks; added securities investment fund sales, business qualifications in the interbank bond market, and successfully developed litigation preservation and guarantee business. In the wealth management sector, the company has added financial leases and business factoring licenses to bring new profit points to the company. The economies of scale of the industrial investment companies outside the highway are beginning to take shape, and the environmental protection industry has built three major platforms for investment and financing, technology research and development, and resource integration, and set up a number of "base areas" inside and outside the province. The company's "one body and three wings" with highway as the core

The pattern is basically taking shape, and diversified development will effectively enhance the profitability of the company.

Investment suggestion: we expect the company's EPS from 2017 to 2018 to be 0.92 yuan and 1.01 yuan respectively, with a "overweight-A" rating and a six-month target price of 10 yuan.

Risk hint: diversification is not as good as expected and commodity trade is declining.