Incidents: During the reporting period, the company achieved annual revenue of 773 million yuan, an increase of 82.45% over the previous year; the net profit of the mother was 122 million yuan, an increase of 74.78% over the previous year; and the gross profit margin was 33.29%, a decrease of 9.8% over the previous year. Among them, in the fourth quarter, the company achieved revenue of 479 million yuan, an increase of 264.02% over the previous year; Guimu's net profit was 25 million yuan, an increase of 54.06% over the previous year. By the end of 2016, the company (and its subsidiaries) had executed contracts totaling approximately $1,909 million, an increase of 114.49% over the same period last year. It is proposed to distribute a cash dividend of 0.21 yuan (tax included) for every 10 shares to all shareholders.
Active endogeny and outreach, and a sharp increase in performance: during the reporting period, the company's revenue/net profit attributable to the mother/execution of contracts increased sharply year-on-year, with a growth rate of 82.45%/74.78%/114.49%. First, the industry and the company were in a stage of rapid development, and its own business contributed partly to the growth in performance, which stemmed from Germany's combined performance. During the reporting period, the purchase and delivery of the company's major assets was completed, and three new products were added to its main business: substation power supply systems, contact network engineering, and signal engineering.
The railway power supply and dispatch order part confirmed that future performance can be expected: during the reporting period, the revenue of the railway power supply integrated automation system/railway power supply and dispatch system decreased 35.95%/11.25% year-on-year.
The main reason is that some of the rail transit construction projects involved in this business are large in scale and have a long execution period. Due to external factors, they were unable to complete the commissioning test and acceptance in 2016, which caused the sales revenue of such products to drop drastically that year, which affected the realization of the current benefits of the project. By the end of 2016, the amount of the railway power supply integrated automation system contract currently being executed by the company was 178 million yuan, and there are plenty of reserves for future projects.
Benefiting from rail transit investment, rail transit security business grew rapidly: during the reporting period, the revenue of integrated security systems for urban rail transit increased 103.85% year on year; gross margin reached 34.05%, down 5.48% year on year. During the “13th Five-Year Plan” period, fixed asset investment for railways will reach 3.5 trillion yuan to 3.8 trillion yuan, of which about 3 trillion yuan will be invested in infrastructure and 30,000 kilometers of new lines will be built. During the “12th Five-Year Plan” period, the country's railway fixed asset investment reached 3.58 trillion yuan, and 30,500 kilometers of new lines were put into operation. This means that the scale of railway investment in the “13th Five-Year Plan” is likely to reach a new high. The company's business is concentrated in the rail transit sector, and increased national investment is beneficial to the company's performance. Combining the country's “Belt and Road” strategy and “China's equipment manufacturing industry going global” policy, rail transit construction is also a pioneering area for “Belt and Road” strategic infrastructure and one of the ten key development areas of “Made in China 2025”. With the implementation of many national strategies, the increase in the density of railway networks, and the acceleration of the pace of construction of intercity and urban rail systems, the rail transit industry will experience huge policy dividends, and the company will have huge market opportunities.
The synergistic benefits of the acquisition of German RPS are worth looking forward to: during the reporting period, the overseas assets purchased by the company, German RPS and RPSsignal, were in a leading position in the market share and technical level of German electrified railways and high-speed rail. The business scope covered Europe, North America, Asia, etc., and was experienced in international projects. After the acquisition is completed, Kai Electric Power and RPS will mutually transform technology and products, expand their business, and strengthen their strength. Kai Electric will have the ability to design contact networks and power supply systems, manufacture key products, and supervise installation, and will have the ability to undertake turnkey projects for traction power supply systems. With this successful acquisition, Kaidian Gas has broken through the limitations that the company's main business was mainly in the field of domestic rail transit construction in the past, and its ability to resist risks has increased. In the future, the company will use RPS to complete an international layout.
Investment advice: increase holdings - A investment rating, target price of 20.00 yuan for 6 months. We expect the company's revenue growth rates from 2017 to 2019 to be 75.6%, 37.5%, and 18.8% respectively, net profit growth rates of 19.0%, 14.6%, and 19.6% respectively, and net profit of the parent company is 144.9, 166.0, and 198.5 respectively. The first coverage gave an investment rating of -A to increase holdings, and the target price for 6 months was 20.00 yuan.
Risk warning: Rail transit investment fell short of expectations, and product competition has intensified.
