Feilita released its 2016 annual report. In 2016, the company achieved revenue of 2,385 million yuan (+7.0%), gross margin fell to 16.2% (-0.9pct), net profit attributable to the parent company was 66 million yuan (+53.4%), and EPS was 0.18 yuan. The company plans to pay a cash dividend of 0.3 yuan (tax included) for every 10 shares.
The increase in non-recurring profit and loss combined with a decrease in financial expenses led to a sharp rise in net profit. Affected by the decline in IT industry sentiment, the company achieved revenue of 2,385 million yuan in 2016, an increase of 7.0% over the previous year, and gross margin fell 0.9% to 16.2%. However, due to the increase in non-recurring profit and loss and the reduction in financial expenses of 5.497 million yuan, the company finally achieved net profit of 66 million yuan to the mother, an increase of 53.4% over the previous year.
Establish a southwest supply chain base to enhance the company's competitiveness. In order to cope with the risk of IT manufacturing gradually shifting to the west, the company invested 199 million yuan to establish a southwest supply chain base in Chongqing in 2016, which further improved the company's business in the southwest region and formed synergies with East China and South China. In 2016, the company achieved revenue of 217 million yuan in the southwest region, an increase of 4.6% over the previous year. In the future, with the gradual improvement of the southwest supply chain base business, we expect the southwest region to become a new growth point for the company's revenue and enhance the company's competitiveness.
Enter the investment sector to cope with the risk of a decline in traditional main business. In order to cope with the risk of declining prosperity in the IT sector, the company actively promoted transformation and upgrading and improved the business layout. According to the company's announcement, in 2016, the company invested 95.95 million yuan to participate in the establishment of the Ningbo Meishan Free Trade Port Area Dingyue Investment Partnership, which mainly invests in the logistics supply chain industry; it participated in the establishment of the Suzhou Zhongding No. 4 Venture Capital Center with 30 million yuan of its own capital, focusing on investment and development in the “supply chain +” field.
Considering that the company's chairman has worked for Kunshan People's Bank of China and Kunshan Trust and has extensive experience in the financial field, we anticipate that it will facilitate the company's transformation, thereby enhancing the company's resilience to risks when its traditional main business declines.
Investment advice: We expect the company's 2017-2018 EPS to be 0.20 yuan and 0.21 yuan respectively, giving it an “increase in holdings - A” rating, with a target price of 11.50 yuan for six months.
Risk warning: Traditional main businesses have declined, and new business development has fallen short of expectations.
