Main points of investment
Event: on October 29, 2016, the company issued a forecast for the third quarter of 2016. From January to September this year, the company achieved business of 933 million yuan, an increase of 95.6% over the same period last year. The net profit of homing was 167 million, up 161 per cent from the same period last year. The company is in good operating condition and steady performance.
Real estate rebounded, with significant growth: in 2016, the company's real estate business was affected by loose monetary and policy environment, and operating income increased in the first half of 2016.
While house prices in first-and second-tier and surrounding cities are rising, residential transaction volume in some hot cities has reached an all-time high. In the first half of the year alone, the operating income of the real estate business exceeded that of 2015, an increase of 688% over the same period last year. We speculate that the growth will slow down in the second half of the year, but remain at a high level, and the growth rate of this sector is expected to reach 400%.
In response to the national policy on capacity removal, the mining trade business has been gradually stripped off: with the obvious national overcapacity, the company's coal mining business operating income has declined year by year, and the gross profit margin has decreased year by year. In the first half of 2016, the mining trade operating income decreased by 80% compared with the same period last year, and the gross profit margin was only 0.41. The decline in operating income from mining trade is not only due to national overcapacity, but also caused by the gradual divestiture of mining trade business by enterprises. In March 2016, China Zhuhai Medical signed a contract to transfer its Xihai Mining Investment Co., Ltd. The company will gradually spin off the mining trading business, which is expected to continue to decline.
Acquisition of Integrated Healthcare and layout of Oncology Medical Industry: in September 2015, Zhongzhu Medical signed an equity transfer agreement with Integrated Healthcare, and in February 2016, Zhongzhu Medical completed the transfer of 100% equity in Integrated Healthcare. And completed a total of 130 million RMB common shares issued to Integrated Healthcare. Through the acquisition of all-in-one Healthcare, the company has expanded the business of medical devices and laid out in the field of tumor treatment. In the first half of 2016 alone, the business in this field brought 120 million yuan to China-Pearl Medical. With the increase in the number of new cancer cooperation centers of Zhongzhu Medical and the growth of its medical device sales, according to the performance of all-in-one Medical Services over the years, the growth of the medical device sector is expected to remain at 15% and 25%.
The employee stock ownership plan has been successfully completed: the company started the employee stock ownership plan in April 2016, and as of September 30, 2016, the employee stock ownership plan has completed the stock purchase. The average transaction price is about 17.98 yuan per share, and the number of shares bought accounts for 6.96% of the company's total share capital. Through the employee stock ownership plan, establish a benefit-sharing mechanism between employees and enterprises, effectively motivate employees, and improve the cohesion and competitiveness of the company.
Profit forecast and investment rating: we forecast that the operating income of China Pearl (600568) from 2016 to 2018 is 1.5 billion yuan, 2.65 billion yuan and 3.32 billion yuan respectively, and the net profit attributable to the parent company is 217 million yuan, 387 million yuan and 508 million yuan respectively; equivalent to 2016-2018 EPS is 0.31,0.54,0.71 yuan respectively; the corresponding PE is 74,42 and 32 times respectively. Zhongzhu Medical is not only a medical device and pharmaceutical company, its real estate business has continued to rise in recent years. This part of the business can not only generate considerable revenue for the company, but also provide cash flow for the development of medical devices and medicine, which promote each other, so we give "overweight" rating for the first time.
Risk hints: real estate is affected by national policies, prices and sales are unstable, leading to the risk of a sharp decline in profits; the risk that instrument sales are difficult to achieve the expected growth rate; the risk that the project construction period is extended, thus affecting income.
