Main points of investment
Event: the company released its annual report for 2016, with operating income of 2.579 billion yuan during the reporting period, an increase of 14.32% over the same period last year, net profit of 251 million yuan, an increase of 38.62% over the same period last year, and earnings per share of 0.27 yuan. The company intends to pay a cash dividend of 1 yuan (including tax) to all shareholders for every 10 shares.
Analysis of the annual report: optical cable and communication equipment are the company's core business, with revenue of 1.53 billion yuan in 2016, an increase of 14% over the same period last year, accounting for 60.45% of the main revenue, while the revenue of the automobile wiring harness business is 615 million yuan, accounting for 24.31% of the main revenue. The revenue of overseas project contracting business is 307 million yuan, accounting for 12.12% of the main income.
Multiple positive factors resonate, and the revenue of optical cable business grows steadily. In 2016, the intelligent transformation of optical fiber and optical cable was completed, the manufacturing cost of cable products was more advantageous, and the comprehensive gross profit margin of optical cable business was raised to 13.28%. In 2016, the company ranked second in China Mobile's special optical cable collection (22%). At the same time, it won the bid for radio and television cable collection in Guizhou and Heilongjiang. With the continuation of the national broadband strategy in the future, the construction of 4G network, cloud computing and the interconnection of big data Center base stations will continue to drive the demand for optical fiber and cable. It is expected that the domestic market demand will reach 270 million core kilometers in 2018, benefiting from the rapid development of the optical communication market, the company's cable business will grow steadily.
EPC received 10 billion orders to provide performance support for the company. Under the implementation of the "Belt and Road Initiative" strategy, the scale of China's foreign contracted projects grew by 16.2% in 2016. the company seized the opportunity to radiate to the surrounding areas based in Essa, Bangladesh, Southeast Asia and East Africa. In 2016, the amount of contracts signed by the company's overseas EPC exceeded 10 billion yuan, with an average construction period of 4-5 years. Revenue is confirmed according to the project progress, which will promote the rapid growth of the company's performance in the future.
Enter the car wiring harness, layout big data, emerging business may be expected. In 2016, China's automobile output reached 28.119 million vehicles, an increase of 14.5% over the same period last year. The rapid growth of automobile production led to the demand for automobile wiring harness. Jinting Harness, a wholly owned subsidiary of the company, fulfilled its performance promise in 2016 and achieved a net profit of 80.03 million for the whole year, accounting for 31.95% of the company's net profit. The development of new energy vehicles will also inject vitality into the company's business in the future. Yongding Zhiyuan, a subsidiary of the company, made a net profit of 25.568 million yuan in 2016. the surge in Internet traffic will bring about the expansion of relevant data collection, analysis and query systems, and the company's performance is expected to increase significantly in the future.
Profit forecast and investment suggestions: with the large-scale investment and construction of the three major operators in optical fiber access and other transmission networks, the company's traditional line business will be steadily supported; the company leads the country in high temperature superconducting material technology and is optimistic about the company's future development in the superconducting market. It is estimated that the EPS of the company from 2017 to 2019 is 0.37,0.50,0.66 respectively. Maintain the "buy" rating, corresponding to the target price of 12.5 yuan.
Risk tips: overseas EPC orders are less than expected risk, subsidiary performance realization or undercommitment, transmission cable market competition risk.