Main points of investment:
Victory shares announced the 2016 report and the first quarterly report of 2017. In 2016, Shengli shares achieved operating income of 2.65 billion yuan, + 5.59% year-on-year; net profit attributed to the parent company-293 million yuan, year-on-year-1118.42%; and the weighted average return on net assets was-14.18%. In terms of the target per share, the company achieved EPS-0.35 yuan in 2016, the net cash flow generated by operating activities per share was 0.06 yuan, and the net assets per share belonging to shareholders of listed companies was 2.41 yuan. In the first quarter of 2017, the company achieved operating income of 767 million yuan, + 27.67% year-on-year, and net profit of 24.22 million yuan,-54.62% year-on-year, and basic earnings per share of 0.03 yuan. The decrease in net profit compared with the same period last year was mainly due to 55.27 million net investment income from the transfer of equity in the previous period. There is no net income from large transfers in this period.
The natural gas business has become the company's main source of profit. The company has accelerated the pace of strategic transformation, and the natural gas business continues to maintain a momentum of rapid growth. The company accelerates the acquisition and merger with the management right of natural gas cities as the core, taking into account the development of upstream and downstream innovation business of natural gas, has successively completed the cooperation of projects such as Puyang in Henan, Bazhou in Hebei, Pulandian in Dalian, Puwan New area and Zhuanghe in Dalian, and the scale of natural gas has increased rapidly. In 2016, the company's natural gas business achieved operating income of 1.309 billion yuan, an increase of 82.74% over the same period last year, accounting for 49.4% of the company's total revenue, and a gross profit of 234 million yuan, becoming the company's main source of profit.
The agrochemical business has been completed and the industrial transformation has been basically completed. In 2016, the company's agrochemical business operating income was 402 million yuan, a decrease of 41.10% compared with the same period last year. The company recorded an impairment loss of 328 million yuan in assets, a substantial increase over the same period last year. This is mainly due to the impairment of products of Shandong Shengbang Green Field Chemical Co., Ltd. and the suspension of some production lines of Dongying Shengli Green Field Pesticide Chemical Co., Ltd. At present, the company has realized the strategic exit of agrochemical business, and the industrial transformation of the company at this stage has been basically completed.
Make use of terminal resources to develop automobile recharging business. In order to develop new energy business, Shengli Shengli signed a "strategic cooperation agreement" with Qingdao Trider to jointly promote strategic cooperation in the field of automobile charging. This strong alliance starts from the terminal fields such as gas filling stations owned by Shengli shares to promote the cooperation of new energy vehicle charging business. Through this strategic cooperation company will cut into the field of automobile recharging, make use of the existing market terminal network to create a multi-level new energy supply system, and open up new business growth points.
Profit forecast and investment rating. We estimate that the EPS of Shengli shares from 2017 to 2018 will be 0.19,0.41,0.57 yuan respectively. According to the 2018 EPS and 30 times price-to-earnings ratio, we will give the company a target price of 12.30 yuan and maintain the "overweight" investment rating.
Risk tips: transformation risk; the progress of natural gas business development is not as expected.
