2016 performance was slightly lower than expected
Longji Machinery announced its 2016 results: operating income was 1.472 billion yuan, an increase of 6.15% over the same period last year; net profit attributed to the parent company was 60.16 million yuan, an increase of 8.33% over the same period last year, corresponding to a profit of 0.16 yuan per share. The performance was slightly lower than we had expected.
Trend of development
The growth rate of 4Q16 performance has reached a record high, and financial expenses have improved significantly. The company's 4Q16 achieved revenue of 399 million yuan, changing the dismal second and third quarters, with a year-on-year increase of 37.4 percent. The growth of the company's product revenue in the fourth quarter was mainly due to the steady improvement in sales performance brought about by the company's further optimization of the product market structure. 4Q's net profit reached 7.26 million yuan, an increase of 66.4% over the same period last year, the highest increase in a single quarter in the past two years. The company's financial expenses for the whole of 16 years have improved significantly, mainly due to the substantial reduction in interest expenses due to the repayment of bank loans, while the company's overseas business continues to benefit from the devaluation of the RMB.
The pressure of product inventory is relieved, and the business profit of brake disc increases with the quantity. In the past 16 years, the company's product sales increased by 7.53% compared with the same period last year, and the inventory decreased by 12.3%. The increase in product sales greatly reduced the inventory pressure, and the inventory turnover days were 31 days shorter than those in 15 years, and the operating efficiency was greatly improved. The revenue of brake disc was 1.115 billion yuan, up 8.42% from the same period last year, and the gross profit margin reached 18.3%, an increase of 1.3% over the same period last year. The gross profit margin of ordinary brake hub and truck brake hub increased by 1.10% and 1.08% respectively. With the improvement of the overall product structure, the company's 16-year gross profit margin increased by 1 percentage point.
The fixed increase has been successfully approved and the liquidity is sufficient. The company's non-public offering shares were formally approved by the CSRC last week, and the additional project is proposed to raise no more than 620 million yuan. The company will be used in the high-end brake disc reconstruction and expansion project and the automobile brake system testing center project. In addition, the company's 13-year increase of project balance of 23.347 million yuan will also be converted into permanent supplementary working capital for the daily operation of the company. We expect that the company's new fixed additional projects and remaining funds will bring sufficient financial guarantee for the company's expansion and R & D projects, and will generate a certain amount of interest income, which will further reduce the company's financial expenses.
Profit forecast
We correspondingly lowered our 2017 profit forecast by 10% to 71 million yuan, and gave an 18-year profit forecast of 85 million yuan.
Valuation and suggestion
Currently, the company's share price corresponds to 67x 2017e Pmax E, and we maintain the company's recommended rating and downgrade the target price by 13% to $15, corresponding to 83x 2017e Pmax E.
Risk.
The Internet of cars continues to lose money.