2016 performance in line with expectations
Shuanglin shares announced its 2016 results: operating income was 3.304 billion yuan, up 33.63% over the same period last year; net profit belonging to the parent company was 327 million yuan, up 34.27% from the same period last year, corresponding to 0.82 yuan per share.
Trend of development
Dragged down by steel prices and export sales, the gross profit margin declined in the fourth quarter: thanks to the rapid growth of the domestic car market, Q4 revenue was 1.09 billion yuan, an increase of 51.1% over the same period last year, but the rapid rise in steel costs and the rapid decline in the export price of the new torch in the fourth quarter resulted in Q4 gross profit margin of 26.5%, down 2.3 percentage points year-on-year / month-on-month respectively. The overall cost control performance of Q4 company was good, with the sales expense rate rising 1.3% year-on-year and the management expense rate falling 1.6% year-on-year. The net profit of Q4 was 83 million yuan, an increase of 24% over the same period last year.
At the moment or in the past, the performance of the new torch has grown rapidly: the rapid rise in steel costs since the second half of last year has had a greater negative impact on the performance of the new torch company, and the company is also actively adjusting the structure of external customers, with a performance of 204 million yuan in 2016, an increase of 15.8% over the same period last year. In the future, as the downward trend of steel prices becomes clear, the maximum impact of the new torch cost may have passed, and as the company successfully develops in the domestic market and enters the SAIC-Volkswagen supply chain system, the net profit in 2018 will enter the rapid growth channel. Affected by the new energy subsidy policy in 2016, sales of Xin Dayang, the main customer of Deyang Electronics, declined, resulting in some negative factors for the company's performance growth. However, the growth of our business is excellent, with a net profit of more than 100 million yuan, which is obviously better than that of New Torch and Deyang Electronics.
Actively seek extension growth, continue to promote business transformation: the company is currently suspended to promote asset restructuring, in order to promote the company's business transformation. At the same time, the company expects that the future cash acquisition of Chengye shares will further enter the SAIC-Volkswagen supply chain system, which will help to optimize the company's customer structure. The group's automatic transmission DSI business is still in short supply, and DSI business sales are expected to increase significantly with the lifting of supplier capacity bottlenecks in the future.
Profit forecast
Taking into account commodity shocks and unconsolidated factors, we cut our earnings per share forecasts for 2017 and 2018 by 16 per cent and 15 per cent respectively from Rmb1.27 and Rmb1.62 to Rmb1.06 and Rmb1.38, respectively. After the statement, the company's performance is expected to increase significantly.
Valuation and suggestion
At present, the company's share price corresponds to 24.5x 2017e P amp E. We maintain our recommended rating and target price of 38.00 yuan, which is 46.27% upside from the current share price.
Risk.
Mergers and acquisitions were blocked and integration was lower than expected.
