The net profit after deduction in 2016 was 93 million yuan, an increase of 434.74 percent over the same period last year. Nanjing Chemical Fiber achieved an operating income of 1.665 billion yuan in 2016, an increase of 9.64 percent over the same period last year. The net profit after being deducted from the parent company was 93 million yuan, a year-on-year increase of 434.74 percent, and earnings per share was 0.3 yuan per share. Among them, the company's 4Q2016 realized operating income of 526 million yuan, an increase of 41.78% over the same period last year; realized net profit of 40 million yuan after attribution and deduction, and realized EPS0.12 yuan per share.
The substantial increase in performance is mainly due to the simultaneous increase in the volume and price of viscose staple fibers. The company currently has a production capacity of 80,000 tons of viscose staple fiber, with sales of 82300 tons in 2016, an increase of 10% over the same period last year. The price of viscose staple fiber rose from 12,000 yuan / ton at the beginning of 2016 to 17,000 yuan / ton, and the product price reached the highest level since 2012.
The company fully benefited from the rise in viscose prices, with viscose staple cilia interest rates of 12.07% in 2016, a sharp increase of 4.31 percentage points over the same period last year.
Lanjing (Nanjing), a shareholding subsidiary, contributed 22.07 million of its income, and its performance further improved. The company has established a joint venture subsidiary Lanjing Nanjing fiber with the world's largest cellulose fiber manufacturer Austria Lanjing in China, which has a production capacity of 160,000 tons of viscose staple fiber per year, and the company has a 30% stake. In recent years, due to the poor viscose market, coupled with Sino-foreign cooperation management problems, Lanjing Nanjing has been in a state of loss all the year round. According to the consolidated statement of Nanjing chemical fiber, the investment income of joint venture and joint venture in 2012, 2013 and 2014 is-0.25,0.34 and-36 million yuan respectively. With the improvement of the company's business and the prosperity of the viscose industry, the company turned a loss into a profit in 2015, with an investment income of 1.08 million yuan, 3.18 million yuan in the first three quarters of 2016 and 22.07 million yuan in 2016. We believe that with the continuous rise in viscose prices, Lanjing (Nanjing) is expected to contribute more revenue to the company.
The prosperity of viscose staple fiber industry continues to rise, and the large cycle will see 2018. Since 2011, the viscose staple fiber industry has entered the capacity removal cycle, with product prices falling all the way, the profitability of the industry has declined rapidly, and backward small enterprises have been gradually eliminated. Since 2015, the supply and demand pattern of the industry has changed significantly, and the relationship between supply and demand has entered an era of tight balance. Looking to the future, the new capacity of the industry in 2017 is still limited, and most of the capacity will not be put into production until the end of 2018. Therefore, we believe that the prosperity of the industry is expected to continue to rise, the current product price has reached 177,000 yuan / ton, this year is expected to exceed 20,000 yuan / ton.
Profit forecast and investment advice. We estimate that the EPS of the company from 2017 to 2019 is 0.64,0.78,0.95 yuan. With reference to the industry-comparable company's average PE valuation level of 15 times in 2017, we believe that the company is the purest and most flexible target in the viscose industry. Sanyou Chemical, Australian Technology and Sino-Thai Chemical all have other businesses, so we give the company 25 times PE in 2017, with a target price of 16 yuan, maintaining a "buy" rating.
Risk hint. The price increase of viscose staple fiber is not as expected and the macro-economy is depressed.