The event company released its 2016 annual report, with sales revenue of 27.155 billion yuan (+ 21.03%), net profit of 12.23 yuan (6.08%) and earnings per share of 0.32 yuan per share. The company's 2016 profit distribution plan: based on the total share capital of the A-share registration date at the time of profit distribution, a cash dividend of 0.48 yuan is distributed to all shareholders for every 10 shares. In the fourth quarter, the company achieved revenue of 8.586 billion yuan (+ 16.36%) and net profit of 453 million yuan (+ 362.22%). In the first quarter of 2017, the company realized operating income of 5.925 billion yuan (+ 6.5%) and net profit of 278 million yuan (+ 38.78%).
Main points of investment
China's largest military supplies light industrial production enterprise, the resumption of military orders is conducive to the recovery of profitability: the company has professional clothing, textile printing and dyeing, professional shoes and boots, protective equipment of the whole industry chain manufacturing plate, as well as its own high-end outdoor leisure brand "JH1912". Jihua Group is the largest quartermaster light industrial production enterprise in China, with a market share of about 70% for munitions (clothing, shoes, hats, accessories, etc.). And public security, judicial, procuratorates, courts, industry and commerce, taxation, railway, transportation and other 14 countries uniform market share of about 10%, and in the central enterprise tooling, industry uniforms and other market share.
During the reporting period, the company achieved revenue of 27.155 billion yuan, an increase of 21.03pct over the same period last year. In terms of categories, sales of professional clothing accounted for 15.63%, professional shoes 15.54%, leather shoes 9.07%, textile printing and dyeing 10.13%, protective equipment 6.72%, trade and other business accounted for 42.91% (of which, brand clothing accounted for 0.13%, Jihua Garden accounted for 0.01%). From the demand side, it is expected that from 2017 to enter the single integrated product R & D and preparation period, the demand quantity and product structure of munitions will change. The company has been included in the list of the first batch of individual equipment suppliers by the Army Department by virtue of its integrated technology protection system research project.
The company's 16-year revenue growth mainly came from the increase in military orders, which increased to 5.83 billion from 57.51 yuan in the same period in 2015, an increase of 1.39pct over the same period last year. The revenue of the civilian products business increased by 10.33% to 10.165 billion yuan. Due to the fierce market competition, the gross profit margin of the company's civilian orders is 7.91%, while the gross profit margin of military orders is nearly 15%. The recovery of military orders and the increase in revenue are conducive to improving the overall profit level. Trade and other businesses rose 52 per cent year-on-year to 12 billion yuan, but gross profit margin fell 1.77 percentage points to 1.44 per cent. The increase in trade is mainly due to the increase in the business related to the upstream and downstream of the non-main industrial chain.
In terms of building its own brand, high-end outdoor leisure brand "JH1912" set up a total of 51 physical stores during the reporting period, a net increase of 1 compared with 2015. Online "Tmall" store has been officially opened and other online sales platforms are being built. JH1912's overall sales revenue accounts for only 0.13% of the company's total revenue. With the implementation of non-public revenue increase, the terminal expansion of JH1912 will accelerate. According to the announcement of the plan, 500 "JH1912" physical stores will be opened offline in the form of purchasing and leasing commercial center shops, and the number of offline terminals will increase significantly.
The "Jihua Garden" project has been steadily promoted to create a leisure sports and commercial shopping complex: the company's "Jihua Garden" project has been steadily promoted to build a commercial complex characterized by commercial shopping and leisure sports, and improve the company's business income structure. The company's private placement has been approved by the CSRC, issuing 535 million shares at a price of not less than 8.19 yuan, and raising a total of no more than 4.4 billion yuan, mainly for the construction of Chongqing, Changchun, Yangzhong, Xi'an, Xianning and Qingjin projects. with the private additional funds in place, the Jihua Garden project is expected to accelerate. Among them, the indoor extreme sports venues of the Chongqing project were put into trial operation in October 2016, fashion shopping and catering and entertainment will be put into trial operation in the first half of 2017, and other projects are expected to be completed in the second half of 2018.
The company is rich in land reserves and government subsidies, and its performance is guaranteed: in addition to the main business profits brought by military products, civilian products and trade, the company successively disposed of its subsidiaries located in more than 1200 mu of urban land from 2013 to 2016. the cumulative disposal income is expected to be about 2.9 billion yuan (before tax). From 2014 to 2016, the non-operating income was 1.179 billion yuan, 1.794 billion yuan and 1.833 billion yuan respectively, which contributed significantly to the performance. The company is rich in land assets, land disposal income and government subsidies to improve the performance of the company.
Investment advice: the company's operating income in 2017 is higher than we expected. We raise our operating income forecast for 2017-2019. We expect revenue from 2017-2019 to be 299,329 and 36.1 billion yuan respectively, and earnings per share to be 0.32,0.34 and 0.35 yuan respectively. The six-month target price is 13 yuan, corresponding to the dynamic PE of 40 times, 38 times and 37 times in 2017-2019.
Risk hint: clothing orders do not meet expectations; Jihua Garden project does not meet expectations.
