2016 is the first year for the company to go public, and it is also a key year for the company to enter the stage of accelerated industrialization of technology. The high growth of performance as scheduled is a good beginning of sustained high growth in the next few years. In 2016 and 2017, Q1 achieved a net profit of 330 million yuan and 70 million yuan, respectively, which were in line with expectations. The technology of ① regenerative rotary hearth furnace was put into production from the first Shagang project in 2010 to the formal commissioning of annuity project in 2016. it is of great strategic significance, which indicates that the technology of the company has officially entered the stage of accelerated industrialization application; ② successfully completed the backdoor listing in 2016; at the same time, ③ completed the increase of core executives and the new chairman (Mr. Song Bin, former chairman of Baosteel Development) took office. The company's main profit contribution projects in 2016 are only Jinchuan Phase I, and we believe that the high profit growth is only the beginning. Looking forward to the next few years, "technological maturity + capital platform + sound governance" will promote the company to embark on the road of sustained high growth.
Analysis of key profit indicators of 2016 Financial report: the starting point of take-off, many indicators do not have long-term explanatory nature
The high profit margin caused by structural factors indicates high growth in the future. The 16-year net profit margin is 38%. The main reason is that most of the projects (Jinchuan II, Zhongjin Taihang, Nicole, Dahe, Hechi South Project) are in the front-end design with high profit margin (gross profit margin 70%) and equipment procurement stage (gross profit margin 70%). This also verifies our judgment from the side that the company has entered the stage of rapid industrialization, a number of projects have been started, 17 years of high growth is guaranteed, and 17 years' profit margins will return to a reasonable level (we judge to be in the range of 15% and 20%).
The significant increase in accounts receivable is mainly due to the company's long-term high growth in the initial stage, few profit contribution projects, greatly affected by individual projects, and has improved significantly in the first quarter. The cash flow of operating activities in 16 years was-104 million, down 122.60% from the same period last year, and the final accounts receivable was 625 million, an increase of 308% over the same period last year, mainly because 511.5 million of accounts receivable from the largest customer had not yet been settled. However, due to 493 million of the accounts receivable of the Dahe project, 17Q1's receivable and operating cash flow has improved significantly.
The main reason for the substantial increase in management costs is the increase in restructuring costs (one-time expenses), and the increase in R & D costs to consolidate long-term core competitiveness. Management expenses increased by 125.83% compared with the same period last year, due to the increase in ① R & D expenses (+ 132%), asset restructuring intermediary fees, and office building rental fees. The amount of money invested in ② R & D is 50 million, + 132% and all of it is expended.
Profit Forecast and Investment rating
Shenwu energy saving has always been the target of our leading market mining and deep tracking, and the company has earned more than 100% + since our recommendation. Recently, the company's stock price has followed the market slightly. We believe that at present, the company has high margin of valuation safety, high growth in performance, strong long-term technical verifiability, and large market capitalization, which is still the core target recommended by us at present. It is estimated that the company's net profit in 17-19 will be 6.91 pound 10.61 billion, corresponding to the valuation of 36-24-16, maintaining the "buy" rating.