Key data of financial reporting
Operating income in the first three quarters of 2016 fell 5.05% year-on-year to 2.891 billion yuan, while net profit attributable to shareholders increased by 30.8% to 320 million yuan. The annual net profit is expected to be between 350 million yuan and 430 million yuan. The performance is generally in line with expectations.
Main points of investment
Copper and aluminum prices run smoothly, creating a good external environment for the company's operation.
The company's comprehensive gross profit margin for the first three quarters of 2016 was 18.95%, an increase of 0.89% over the same period last year. The fluctuation range of copper and aluminum prices in 2016 is much narrower than that in 2015, with a steady upward trend, which creates a good external environment for the company's operation. In the first three quarters of 2016, earnings due to copper and aluminum futures operations improved significantly compared with the same period last year, with the company making a profit of 16.5618 million yuan in futures hedging trading in 2016, compared with a loss of 59.7402 million yuan in the same period last year.
The sound layout of high-end products and the active expansion of new business are expected to lead to sustained growth in performance.
In the field of high-end products, the company has competitive advantages in submarine cables, nuclear power plant cables, UHV overhead lines and many other fields, and related products have accumulated strong supply experience, and are currently strengthening the R & D of new products such as marine engineering umbilical cord cable, 500kV high voltage DC submarine cable, locomotive and rolling stock cable, which will help the company to expand into ocean engineering, rail transit and other emerging markets. In the new business area, the company completed the acquisition of Hanhe Machinery under Hanhe Group, the controlling shareholder, in September 2016, expanding new businesses such as machinery and equipment and accessories, processing, manufacturing and installation of light and heavy steel structural parts. Hanhe Machinery business is expected to form coordination with the company's main cable manufacturing business, as well as the subsidiary Hanhe Electric Engineering Power Transmission and Transformation Project General contract business, becoming another fast-growing new business of the company.
Maintain the "overweight" rating
We expect that in 2016-2018, the company will achieve 0.124, 0.15,0.18,35.8,29.3,25.1 times EPS E under the current equity.
Risk hint
Business expansion may fall short of expectations; new product development may fall short of expectations; industry competition may intensify.
