This report is read as follows:
The company released its annual report for 2016, showing an increase of 10.50% in revenue and 49.77% in profit, exceeding market expectations.
Fixed price increase + equity incentive exercise price upside down to bring the margin of safety, major shareholders to help leap-forward development can still be expected.
Main points of investment:
The company released its 2016 annual report, with operating income of 1.036 billion yuan in 2016, + 10.50% year-on-year, and net profit of 99.33 million yuan, + 49.77% year-on-year, corresponding to EPS0.39 yuan; operating income of 335 million yuan in the fourth quarter, + 33.85% year-on-year, and net profit of 35.11 million yuan, + 134.8% compared with the same period last year, exceeding expectations. The devaluation of RMB has a pulling effect on the revenue side of the company, and revenue began to accelerate in the third and fourth quarters, while continuing to contribute to exchange earnings, leading to better-than-expected results. We have raised the company's EPS from 2017-2019 to 0.37 Universe 0.44 0.49 yuan (up to 0.06 + 0.10) and maintained the "overweight" rating, with a target price of 24.91 yuan.
The devaluation of the RMB and the recovery of the US economy have accelerated the growth of income. The depreciation of the RMB and the recovery of the US economy have begun to have a pulling effect on the company's revenue, which began to accelerate in the third and fourth quarters, and is expected to maintain rapid growth in the first quarter of 2017. At the same time, the rapid devaluation contributes a lot of exchange gains, the financial cost of the fourth quarter is-9.53 million. Raw material steel prices began to rise in the second half of 2016, resulting in a slight decline in gross profit margin. Steel prices were high in the first quarter of 2017. As a leader, the company has the ability to absorb some of the price pressure, and gross profit margin is expected to decline slightly.
Fixed price increase + equity incentive price upside down brings the margin of safety, the help of major shareholders can still be expected. The fixed price increase implemented by the company in 2016 is 15.95 yuan per share, and the exercise price of equity incentive is 16.93 yuan per share, bringing a margin of safety to the company's current stock price (14.06 yuan per share). It is a high probability event that the performance reaches the exercise condition of equity incentive due to the pull of income from the depreciation of RMB and the recovery of US economy and the promotion of additional investment projects. On the other hand, the high share of major shareholders (54.62%) + external high-quality assets (Tongrun auto parts + Tongrn drive equipment) is expected to help the company achieve great-leap-forward development.
Catalyst: RMB depreciation; asset securitization or extension is expected to advance.
Core risk: asset securitization or extension expansion is blocked.