Items:
The annual performance forecast of the company announcement is expected to be attributed to the parent company's net profit year-on-year decline.
Comments:
R & D investment drags down negative growth of performance
In terms of revenue, the growth rate in 2016 is expected to be 10% to 20%, which is the normal level of the industry. However, R & D expenses have increased substantially for two years, increasing by 29.69 million yuan in 2015, and are expected to continue to increase by about 30 million yuan in 2016 compared with the same period last year. Increased investment in R & D has been a drag on negative growth for two consecutive years, and the final decline is expected to be close to the upper limit of 10%. In 2017, with the landing of R & D achievements, the company's R & D costs are expected to be capitalized, so as to reduce the drag on performance.
The order accelerated to establish the performance inflection point in 2017, adding leverage to speed up to help PPP land.
The company's orders have accelerated since December 2016. at present, the total amount of projects on hand is more than 2 billion yuan, gradually verifying that the company has entered the inflection point of expansion. combined with industry information, we expect that company orders will continue to accelerate in the first quarter of 2017. In addition, the company's board of directors decided that the maximum loan in 2017 is 2 billion yuan (the current loan is only 470 million yuan), it can be seen that the company will increase leverage to speed up the rapid landing of PPP projects. We believe that the acceleration of orders and the implementation of PPP projects will lead to an inflection point in 2017 and a return to growth.
Major asset restructuring to make up for shortcomings, work together to promote the development of the company
The company is promoting a major asset restructuring, the acquisition of Jiangsu Kaimi and Jinqiao Water Science. Through the acquisition of Jinqiao Water Science, the company has made up for the shortcomings of engineering qualifications, clearing the way for the development of PPP; after the acquisition of Jiangsu Cami, the company will become the most comprehensive membrane product supplier in China. In addition, the restructuring will make the company's shareholder structure more diverse. Tianjin membrane (17.13%), Hi-tech Investment (14.03%) and Jiangsu Kaimi Wang Huailin (11.61%) may jointly participate in corporate governance through the way of the board of directors. Under the equity binding, the company has the same goal and the governance structure is further straightened out, which will work together to promote the rapid development of the company.
Risk hint
The implementation progress of the project is not as expected; the major asset reorganization failed.
Maintain a "buy" rating. Considering that the higher-than-expected growth of R & D expenses has dragged down the negative growth of performance, the profit forecast for 2016 has been lowered to 0.17 yuan. Considering the acceleration of orders and the rapid landing of PPP to establish the inflection point of performance in 2017, and considering that the restructuring is expected to be completed in 2017, maintaining the profit forecast of 0.60 yuan 0.91 yuan in 2017-2018 (of which the committed performance of acquired assets is 0.29 EPS 0.36 yuan respectively), the current share price corresponds to 2016-2018 PE is respectively times that of 99-28-18. The price of restructuring and additional issuance and three-year private financing is 15.22 yuan, and the current share price premium rate is relatively low (9.1%), with a high margin of safety. Taking into account the company's ownership structure, management team and performance inflection point, the continuous acquisition of subsequent PPP projects has greater flexibility to contribute to performance, with a target price of 24.00 yuan and a "buy" rating of 40 times PUnip E in 2017.
