Committed to building high-end steel casting production enterprises, mechanical processing revenue growth.
The company's main products are power generation equipment, construction machinery and rail transit supporting large steel castings, is currently committed to the research and development of the core components of major energy equipment, will increase the proportion of high-end steel castings in product income. The company's main business is sound. In the first half of 2016, under the grim situation of the foundry industry, the company's revenue was 201 million yuan, down 4.93% from the same period last year, and the net profit was 27.4776 million yuan, an increase of 0.16% over the same period last year. In order to cope with the grim situation, the company actively expanded the industrial chain, of which the mechanical processing business increased by 143.33% compared with the same period last year.
Benefiting from the rapid growth of rail transit investment, power generation equipment castings stabilized
In the 13th five-year Plan, a comprehensive rail transit system will be built, with an additional 3800 kilometers of urban rail transit and an investment of 2.6 trillion yuan to 3 trillion yuan. Among them, the investment in the purchase of urban rail vehicles accounts for 11.8%. In the next five years, the investment in the purchase of urban rail vehicles is 358.7 billion yuan, with a compound annual growth rate of 20-25%. The company also signed a long-term procurement contract with General Electric Co Rail Transit Department of the United States, so that the company's new rail casting production capacity has been fully digested. Benefiting from the high growth of rail transit investment, the revenue of rail transit castings is expected to increase by more than 25%. During the 13th five-year Plan period, the growth rate of hydropower and thermal power in China is expected to decline to a certain extent, but the incremental decline is relatively small. Benefiting from specific policies, the proportion of large power stations will increase in the future, and the market demand for large power generation equipment castings will increase.
In May 2016, the company plans to raise 500 million yuan in non-public offering shares to focus on the research and development of core components for super thermal power units, high-end gas turbines and hydropower wind turbines. Among them, super thermal power units are thermal power units encouraged by the state in the 13th five-year Plan, which have the advantages of high power generation efficiency and low pollution. Hydropower and wind power is also a clean energy supported by the state, and the installed capacity of wind power will increase by 110% during the 13th five-year Plan period. The company's product upgrade will improve the scientific and technological level of the products, help to seize the high-end casting market, and make it "made in China 2025".
It is proposed to focus on the development of high-end equipment manufacturing industry to provide casting raw materials.
Investment advice: buy-An investment rating, 6-month target price of 35 yuan. We expect the company's EPS from 2016 to 2018 to be 0.27,0.41,0.44 respectively, maintaining a buy-An investment rating and a six-month target price of 35 yuan.
Risk hint: the foundry industry is in the doldrums and the product structure adjustment is lower than expected.