Key points of investment:
Incident: On June 2, 2017, the company issued an announcement stating that company directors Qin Bingjun, Zhu Zhipeng, financial director Bai Xuehua, deputy general manager Xun Zhenglai, and the spouses of the above personnel increased their holdings of the company by a total of 31,400 shares through the secondary market on June 1, 2017. At the same time, the shareholders mentioned above promised not to reduce their holdings of the company's shares within six months from the date of increase in their holdings.
The increase in holdings shows confidence in the company's development. This increase in the holdings of some directors and senior managers reflects their confidence in the company's future development and recognition of the long-term investment value. The act of increasing holdings helps to enhance the confidence of investors and effectively safeguard the rights and interests of investors and the stability of the capital market.
The traditional shipbuilding and offshore business is being upgraded and transformed into high-end products, and in vitro EPC platforms are expected to be included as the main body in the future. The company has been deeply involved in the field of shipbuilding and marine engineering for many years, has strong strength, has virtual digital design capabilities, and has built a relatively complete collaborative design information platform. The global shipbuilding and offshore industry is currently in a slump. Relying on ship design and general contracting capabilities for ship engineering, the company is actively upgrading and transforming high-value-added products such as green energy-saving ship models and high-end special ship models to create new business growth space. Furthermore, according to the “Purchase of Gold Shipping Transaction Report (Revised Draft)”, the company's EPC business platform and production base, Otsu Heavy Industries, is still outside the company, and will be incorporated into the company's main body in the future when conditions are appropriate.
The entire natural gas industry chain has been built, military and civilian integration continues to be deployed, and outreach is developing well. In terms of clean energy, the company relies on Woking Natural Gas's operating license qualifications, gas source guarantee, and key technologies for LNG power ship systems to carry out water gas filling business, strives to build a whole industry chain for marine natural gas applications, and has set up a joint venture with CNOOC to ensure the sustainable and healthy development of the business. In terms of defense equipment, after the company acquired Jinhaiyun, it built the first domestic military and civilian integration industrial park with exemplary significance, forming a large-scale equipment industry that designs, manufactures, and serves the defense needs of the entire military.
The leader of the auxiliary ships of the private army is looking forward to the emergence of a zero to one breakthrough. With the development of China's deep blue navy, we expect the market size of the Navy's main battleships to be close to trillion dollars in the next 30 years, and the corresponding market space for military auxiliary ships is also impressive. Currently, the company is exploring and entering the military auxiliary ship market in due time, relying on its strong strength in ship design and manufacturing and the advantages of Ginkhaiyun's military goods manufacturing qualifications, to obtain continuous, high-value-added orders, and is optimistic that the military auxiliary ship business will achieve a breakthrough from 0 to 1.
Cooperating with China Shipbuilding Heavy Industries Group is expected to share the mixed reform dividends. The company cooperated with Beichuan 704 companies in 13 to establish Shanghai Hengtuo Shipbuilding; in 2015, a joint venture with Beichuan 702 established China Shipbuilding Heavy Industries (Shanghai) to save energy; and Wuhan Shipbuilding, an important member of the Strategic Cooperation Group in '17. Furthermore, the actual controller of the company, Mr. Liu Nan, came from a Southern Ship background. As the mixed reform of north-south ships deepens, the dividends of the reform will be shared.
Profit forecasts and investment recommendations. The total share capital increased to 960 million after the 2016 share capital was reduced by 10 to 15. The 2017-19 EPS is expected to be 0.22, 0.29, and 0.37 yuan respectively. Combining comparable companies' average PE in 2017 and military business valuation premiums, the company was given 50 times that of PE in 2017, corresponding to the target price of 11.00 yuan, and a “buy” rating.
Risk warning. (1) The progress of military auxiliary ships is uncertain; (2) changes in the natural gas business market; (3) the expansion of high-value-added ships is not smooth.