The company's performance in the first quarter of 2017 is under pressure, mainly affected by rising expenses + income lag and volatility, but does not affect the long-term outlook. Consumer finance has been sown, which is in synergy with the company's "railway + urban rail" double-end layout. Continue to strongly recommend.
Event: the company released its quarterly report for 2017, with operating income of 30.791 million yuan, down 38.03% from the same period last year. Net profit belonging to shareholders of listed companies was-21.4188 million yuan, down 1646.20% from the same period last year.
The two main reasons are under pressure on the performance and do not affect the long-term outlook: the company's performance declined to a large extent in the first quarter of 2017, which is mainly caused by two reasons: 1) the cost side: easy Weixun began to consolidate tables at the end of 2016. this led to an increase in expenses in the first quarter of 2017, sales expenses and management expenses increased by 34% and 48% respectively. 2) Revenue side: the company's railway business revenue declined to a certain extent in the first quarter of 2017, and the number of railway orders executed decreased. The company's railway traffic safety monitoring products are post-station projects, which are 1-2 years behind the railway infrastructure, and some of their income has not yet been landed. At the same time, railway traffic safety monitoring products also have a certain seasonal fluctuation. So, will the company's traditional business collapse for a long time? We think that there is no need to be too pessimistic, in fact, from the industry trend, the current investment in China's railway construction in the 13th five-year Plan has not been reduced, and the demand for railway construction is still huge. It will take time to transfer from the railway infrastructure to the post-station project, when the company's business will pick up. In addition, new businesses such as integrated railway operation and maintenance, urban rail transit and passenger transport automation have not yet been fully implemented, which will provide new fuel for the company's performance after the formation of the climate.
Consumer finance has been sown, and there is a significant synergy with the company's "railway + urban rail" double-end layout: the company has previously cut its business into the "urban rail intersection" end through the acquisition of Beihai Communications, which is mapped with the traditional business, forming a "railway + urban rail" double-end pattern. This has a good synergy with Everbright Consumer Finance Co., Ltd. Expandable businesses such as: 1) ticket payment scenarios; 2) big data services based on rail services; 3) advertising in rail service scenarios. With the help of the huge passenger flow base of railway passenger + urban rail transit, consumer financial business is expected to fully develop the company's traditional business resources and contribute more than expected income to the performance.
Maintain the "highly recommended-A" rating: taking into account the impact of industry fluctuations and income lag on the company's traditional business, we downgrade our net profit from 2017 to 2018 to 15,000,000 yuan. Maintain the "highly recommended-A" rating.
Risk hints: (1) the policy support for rail transit construction is not as strong as expected. (2) the business of consumer financial companies is blocked.
