Benefiting from the supply-side reform and Belt and Road Initiative, the traditional heavy machinery business came out of the ice valley in 2017. Benefiting from the supply-side reform, the profits of the heavy chemical industry, especially the leading enterprises, have improved significantly, making the company's traditional heavy machinery business enter a significant demand recovery period in 2017, and the customer structure has been more optimized; benefiting from the 13th five-year Development Plan of Shanxi Wind Power, the company's demand for wind power equipment has continued to pick up; the company has set up a "Belt and Road Initiative" strategic project team, and the export of business such as train axles, mining excavators and heavy machinery is expected to grow rapidly.
After cultivation, the emerging business has entered the performance contribution period. The company's R & D expenses increased significantly during the 12th five-year Plan period. after a large amount of capital investment and cultivation in the early stage, emerging businesses such as high-speed rail axles, offshore drilling rigs and core components of offshore nuclear power platforms are expected to begin to gradually contribute to their performance. it is conducive to optimizing the company's business structure and improving the overall profitability.
The reform of state-owned enterprises in Shanxi Province is worth looking forward to. According to the China Securities Network, the new party secretary of Shanxi SASAC proposed that "Shanxi should make good use of the platforms of 18 state-controlled listed companies and vigorously promote the capitalization, capitalization and securitization of state-owned resources." Eighteen state-controlled listed companies must take action in the capital market every year starting this year. " We believe that the reform of state-owned enterprises in Shanxi Province is worth looking forward to both in terms of progress and intensity. As a state-owned holding enterprise in Shanxi Province, the parent company Taizhong Group has high-quality assets such as high-speed rail wheelsets and high-end heavy machinery, which has a strong synergy with the company's business. At the same time, the company belongs to the type of enterprises that the state encourages debt-to-equity swap, and there is a possibility of debt-to-equity swap, which is expected to greatly reduce the company's interest expenditure.
Profit forecast and rating: based on the existing business, the net profit for 2016-18 is expected to be-18.5,2.1 and 410 million yuan respectively, and the EPS is-0.72,0.08,0.16 yuan respectively. Compared with similar companies, the company has a better business structure and a high position in the industrial system. Combined with the comparable company PS and the overall market capitalization comparison method, the company's current market value of 11.6 billion is significantly undervalued, with a target market value of 17 billion yuan and a target price of 6.6 yuan.
Risk hint: supply-side reform slows down; emerging business expansion is low-expected.