2016 performance in line with expectations
Oriental Tantalum Industry announced its results in 2016: operating income was 870 million yuan, down 19% from the same period last year; the net profit belonging to the parent company was 29 million yuan, up 670 million yuan from the same period last year, corresponding to a profit per share of 0.07 yuan, which was in line with the performance forecast. This is mainly due to the receipt of restructuring termination compensation of 352 million yuan in 2016. The net profit loss after deducting non-profit was 330 million yuan, reducing the loss by 340 million yuan compared with the same period last year. Comments:
1) production and sales volume dropped sharply compared with the same period last year. In 2016, the company's product output / sales volume was 9358, 9446 tons, down 48% from the same period last year, down 43% from the same period last year, mainly due to the low economic operation at home and abroad, industry overcapacity and the downturn in the tantalum and niobium industry, and shrinking demand for traditional products.
2) the gross profit margin of tantalum and niobium products decreased by 1ppt to 6% compared with the same period last year, mainly due to the decline in product prices, the average price of tantalum fell by 15% in 2016 compared with the same period last year, and the gross profit margin of titanium and titanium alloy products was-53%.
3) the turnaround of the performance is mainly due to the 352 million yuan of compensation from the restructuring party, which increases the non-recurrent profit and loss. At the same time, the improvement of quality and efficiency is about 70 million yuan for the whole year through meticulous management, the impact of the difference between deduction and reversal of various impairment on profits is 20.27 million yuan, and the financial expenses are reduced by 26.18 million yuan.
4) 2017 target: plan to achieve a profit income of 860 million yuan.
Trend of development
Improving quality and increasing efficiency, reducing losses and getting rid of difficulties are still the focus of the company's work in 2017. At present, the growth of tantalum and niobium industry is slow, and the company is still facing the dilemma of falling volume and price of leading products and declining market share. At the same time, the new industrial products are still in the stage of expanding the market, with a large amount of accounts receivable and a long term, which puts pressure on the operation of the company.
Profit forecast
Considering that metal prices remain low, we keep our earnings per share forecast for 2017 unchanged at-0.72 yuan and introduce earnings per share forecast for 2018 at-0.46 yuan.
Valuation and suggestion
At present, the company's share price corresponds to 6x 2018e P amp B. We maintain a neutral rating and a target price of RMB 10.00 (corresponding to 4.6x 2018e Phand B). The company achieved a turnround with restructuring compensation in 2016, but the pressure on the main business still exists, and it will take time to turn around the operating losses.
Risk.
Demand fell short of expectations and metal prices fell sharply.