Main points of investment
Emphasis was placed on the supervision of grain quality and safety, and 1302 grain quality inspection institutions were established in 17-19. The State Grain Administration issued a circular on matters related to the implementation of the "High quality Grain Project" and improved the grain quality and safety inspection and monitoring system. The 13th five-year Plan is planned to establish and improve the grain quality and safety inspection and monitoring system composed of 5 national, 32 provincial, 305 municipal and 960 county-level grain quality inspection institutions. It is estimated that the corresponding demand for testing instruments from 2017 to 2019 is 18.2,12.45 and 2.885 billion yuan respectively.
Fiscal and tax subsidies pave the way and the first batch of purchases will be completed by the end of October this year. According to the historical situation, it is expected that the central government plus local financial subsidies are expected to cover 60-70% of the investment. It is required to complete the arrival, installation, commissioning, acceptance and actual working status of the purchased inspection instruments and equipment by the end of October.
The field of food security has entered the harvest period, bringing significant performance flexibility. Grain quality inspection agencies need to use gas chromatograph, liquid chromatograph, atomic fluorescence spectrophotometer, atomic absorption spectrophotometer and many other testing instruments. We estimate that the coverage of the company's products is more than 50%. In the past three years, the instrument business income of the company is about 250 million yuan, of which RoSH testing of electronic and electrical products accounts for about 70%. The company has outstanding competitive advantages in the field of heavy metal detection in grain, and has successfully developed gas chromatography and liquid chromatography products. The annual demand for new equipment in the field of food security is about 2 billion yuan, and the construction of food security testing institutions is accelerated, bringing a new round of opportunities for the company's traditional main business.
Maintain the "overweight" rating: optimistic about the medium-and long-term growth trend of the inspection and testing industry, epitaxial mergers and acquisitions enter growth industries such as VOCs and POCT, and the company enters a high-speed growth channel. Secondly, the acceleration of the construction of the food security testing center brings a new opportunity period for the company's traditional main business. It is estimated that the company's EPS from 2016 to 2018 will be 0.11 / 0.280.44 yuan respectively, corresponding to PE84.3x/33.5x/21.6x, "overweight" rating.
Risk hint: the promotion of environmental protection and food safety policies is lower than expected.