1Q17 performance is lower than expected.
Sony Financial announced 1Q17 results: operating income was 161 million yuan, down 39% from the same period last year; net profit belonging to the parent company was 19.6 million yuan, down 75% from the same period last year, corresponding to earnings per share; excluding income from asset sales in the same period last year, non-net profit increased five-fold to 19.28 million yuan from the same period last year.
Trend of development
The growth of various types of financial business has slowed down. The balance of long-term receivables in the final financial leases of 1Q17 was 3.1 billion yuan, up 21% on 16% compared with the same period last year; the balance of loans and advances issued by small loans and pawns was 1.5 billion yuan, up 10% on 5% on a year-on-month basis; and the transaction volume of matchmaking on P2P platforms was 260 million yuan in a single quarter, down 48% on 35% on a year-on-month basis.
Rooted in Anhui, look at the whole country, continue to improve the layout of the financial control platform. Together with Anhui Provincial Investment Group under the Provincial State-owned assets Supervision and Administration Commission and China Cinda's China Resources Economic Development Company, we initiated the establishment of the second local AMC platform in Anhui Province (the company invested 400 million yuan to hold 10% of the shares) to enter the non-performing assets disposal market. Through the establishment of financial leasing subsidiaries to expand the national market and automobile financial leasing business, establish strategic cooperation with a number of mainstream automobile manufacturers and sales enterprises, and focus on developing key regional markets such as Zhengzhou and Tianjin.
The central bank has approved the change of shares in Haike Rongtong, but the acquisition process has been put on hold for the time being. Because the company involved ~ 350 million of financial lease receivables that failed to make provision for bad debts in accordance with the regulations, there was an error in the 2016 semi-annual report, which was ordered by the Anhui Provincial Bureau of Securities Supervision to correct it. As a result, the review of asset reorganization is currently suspended, and the process of review and recovery is uncertain.
Shareholders and senior executives may increase / reduce their holdings or affect stock price fluctuations: 1) according to the controlling shareholder Sony Investment and the company's Supervisor Gao's plan to increase their holdings in the next six months, it is proposed to increase holdings by 56 million to 112 million yuan (corresponding to the current price of 261-5.23 million shares and 1.1% of 2.2% share capital), and the plan to increase holdings will be implemented as early as May 2. 2) according to the previously disclosed shareholder reduction plan, Anhui Conch Cement (currently holding 7.51%) plans to continue to reduce no more than 2.42 million shares (accounting for 1% of the total share capital) at a price of not less than 28 yuan per share in the next four months. Zhang Jinghong (currently holding 7.06%) intends to reduce no more than 4.84 million shares (2% of the total share capital) at a price of not less than 26 yuan per share in the next six months.
Profit forecast
In view of the slowdown in the growth of the company's loan balance, we have lowered our earnings per share forecasts for 2017 and 2018 by 20 per cent and 10 per cent respectively from RMB0.83 and RMB0.98 to Rmb0.67 and Rmb0.88 respectively.
Valuation and suggestion
At present, the company's share price corresponds to 3.7x 17e P amp B. We maintained a neutral rating, but lowered our target price by 24.97% to 25.00 yuan, which is 16.66% higher than the current share price.
Risk.
The asset restructuring failed and the loan quality deteriorated.
