Investment logic
Relying on CITIC Group to build a leader in heavy machinery, downstream warming and large-scale fixed asset investment to help the company's performance recovery. Citic Group is a large state-owned comprehensive multinational enterprise group, whose business involves finance, resources and energy, manufacturing, project contracting, real estate and other fields, ranking 156th in the Fortune 500. Citic heavy Industry is an important manufacturing asset platform under the Group, which is mainly engaged in the development, development and sales of large sets of technical equipment and large castings and forgings in building materials, coal, mining, metallurgy, electric power, energy saving and environmental protection industries. It is the leader in the domestic heavy machinery manufacturing industry. The supply-side reform in 2016 has brought building materials, coal, steel and other downstream industries into a profit recovery channel. 17 years of domestic large-scale fixed asset investment will also bring incremental market demand for heavy machinery, and the company's performance is expected to improve gradually. According to the information of the recent middle-level cadre meeting on the company's official website, in January 17, the company's operating income, total profits, effective orders, collection and other indicators comprehensively achieved a substantial increase compared with the same period last year, with a cumulative collection of nearly 600 million yuan in that month, making a profit as a whole. a substantial increase over the same period last year; the company's market orders maintained a good momentum, and the cumulative production tasks in hand increased greatly compared with the same period last year.
Layout of eight business sectors, the acquisition of Tangshan Kaicheng to tap the growth potential of special robot business. The company as a whole forms eight traditional and emerging business sectors, the traditional business layout includes core equipment manufacturing, engineering sets, manufacturing services, key basic components; emerging business layout includes special robots, new energy, energy saving and environmental protection, and military industry. The eight major business layouts will help the company realize the two-wheel drive of traditional kinetic energy and new kinetic energy, and speed up the company's business industrialization and market development. The company acquired 80% of Tangshan Kaicheng in 2015, focusing on tapping the development potential of the special robot business, which gives the company a first-mover advantage in the fast-growing robotics business, which is of great benefit to its long-term performance.
The state-owned enterprise reform, "Belt and Road Initiative" catalysis increment space, the company recovery situation is clear. 2017 is the year of deepening the reform of state-owned enterprises. the two local conferences have focused on the reform of state-owned enterprises and launched pilot reform programs one after another, and the pilot projects of restructuring of central enterprises, mixed ownership and employee stock ownership will be accelerated this year. The reform of state-owned enterprises is expected to expand in breadth and depth, which is expected to release more reform dividends and improve the performance of the company. In 2016, the company actively seized the strategic opportunity of "Belt and Road Initiative" and signed major business contracts with GCL of Pakistan, Century Pinnacle Mining Company of the Philippines and other enterprises, and has set up branches in countries with more than 1 stroke 3 along the "Belt and Road Initiative" route. The products and services cover more than 30 countries and regions, and the proportion of overseas business revenue has reached 50%. It is expected that the further promotion of the "Belt and Road Initiative" strategy will create more incremental space for the company in the future.
Profit forecast
We forecast that the company's operating income for 2016-2018 will be 32.8 million yuan (40.4 million), an increase of-18.4%, 23.2%, 15.3%, respectively, and a net profit of-1374, 48, 226 million and 0.052 yuan, respectively, for EPS.
Investment suggestion
We believe that the recovery of the heavy machinery downstream industry will lead CITIC heavy Industry to improve its profits; the company will lay out eight major business sectors and accelerate the industrialization of emerging businesses. as well as the acquisition of Tangshan Kaicheng to develop the potential of special robot business will help to improve long-term competitiveness and improve future profitability; the reform of state-owned enterprises and the gradual promotion of the "Belt and Road Initiative" strategy will catalyze more incremental space. We give the company a "buy" rating, with a 6-12-month target price of 7.2-8.5 yuan.
Risk hint
The sharp rise in the price of raw materials may lead to a decline in the company's gross profit margin.
The slow progress of fixed asset investment projects may lead to a worse-than-expected recovery in the company's performance.
In January this year, 153 million shares, accounting for 3.52% of the total share capital, may be at risk of lifting the ban on the sale of shares.