Smooth implementation of the business plan, mechanical processing revenue growth
The company is doing well. According to the 16-year annual report, 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. The company's main products are power generation equipment, construction machinery and rail transit supporting large steel castings. The company is actively expanding the industrial chain, benefiting from the "Belt and Road Initiative" national strategic infrastructure construction, mechanical processing revenue growth.
Enjoy the high growth dividend of rail transit market and work with GE to digest bogie capacity
The market space of rail transit in China is huge, and the 13th five-year Plan will actively build a comprehensive rail transit system. The mileage of railways in operation across the country will be adjusted to 150000 km in 2020 and 175000 km in 2025, and the urban rail will receive a sustained investment of 3.11 trillion yuan last year. Rail transit industry steel castings will still have a relatively strong demand, will maintain a rapid growth. The company will seize the development opportunity of the rail transit market and actively layout the rail transit steel casting market. The 15-year annual report shows that the signing of a long-term rail transit product supply agreement with the GE Group of the United States will effectively absorb the new rail transit bogie capacity.
Focus on the layout of high-end equipment steel castings, helping to make in China 2025
"made in China 2025" proposes to focus on the development of high-end equipment innovation projects, and many industries in high-end manufacturing need steel castings as basic parts. Conforming to the direction of product structure optimization during the 13th five-year Plan, the company has continuously enhanced its core castings for major equipment by means of process innovation and technology introduction, and reported that in the next three years, the company has identified and implemented the core castings of GET heavy truck drive electric wheels, H-class gas generator sets TS and CDC key core castings, manned light rail bogie development and project development of ultra-high critical cast steel containing cobalt and boron.
Investment advice: buy-An investment rating, 6-month target price of 35 yuan. We estimate that the company's EPS from 2016 to 2018 will be 0.27,0.41 and 0.44 respectively, with a buy-An investment rating for the first time 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.