Summary of the report:
Event: Sunrise Oriental released its annual report for 2016 and quarterly report for 2017. affected by the decline in the main solar water heater industry, the company achieved an annual operating income of 2.352 billion yuan (- 9.37%) and an attributable net profit of 244 million yuan (- 9.52%). In the first quarter of 2017, the operating income was 383 million yuan (- 23.99%), and the attributable net profit was 17 million yuan (- 62.23%).
The solar energy heat utilization industry is in the doldrums, and the concentration of engineering channels is expected to increase: due to the influence of the downstream demand of the early subsidy policy for home appliances going to the countryside, the solar energy heat utilization industry continued to decline after the withdrawal of the policy in early 2013. According to the China Solar Heat Utilization Industry Alliance, the total output of China's solar heat collection system was 3950 million m2 (- 9.2%) in 2016, slightly narrowing compared with 17% in 2015. Among them, the vacuum tube type is still the leading product, the output is 3420 million m2 (- 9.9%), the proportion of the flat type increases slightly, the output is 5.3 million m2 (- 3.3%). The engineering channel gradually occupies the upper hand, accounting for 68% (+ 13%) in the first half of 16 years. Considering the company's dual-brand advantages of four seasons, sun rain, perfect sales network and technical research and development capability, it is expected that with the gradual increase of engineering channel industry concentration and the development of China's solar energy in heating, industrial and agricultural thermal applications, Sunrise Oriental solar business revenue is expected to gradually stabilize.
Shuaikang kitchen electricity acquisition completed, kitchen electricity plate coordination is expected to become a growth point: according to the company's annual report, the business income of Muge kitchen electricity products in the four seasons of 2016 exceeded 100 million yuan, and the independent brand kitchen electricity market developed smoothly. At present, Sunrise Oriental has a third-and fourth-tier market, perfect and efficient marketing network, including 3000 first-level distribution outlets and 30000 second-level distribution outlets. After the completion of the acquisition of Shuaikang Electric, it is expected that the company will make use of the brand strength of Shuaikang in the kitchen electricity market, and complement Shuaikang in terms of channel, technology, operation and so on, resulting in a high synergy effect.
Profit forecast: taking into account Shuai Kang's combined table factors, it is estimated that the company's EPS for 17 to 19 years is 0.43pm 0.48amp 0.55 yuan respectively, corresponding to the latest closing price PE of 19x17max 15x, giving an overweight rating.
Risk hint: solar energy industry continues to decline, kitchen electricity business development is not as expected