Report summary:
Incident: The company disclosed its three-quarter report on October 29, 2016. In January-September, the company achieved operating income of 12.065 billion yuan, a year-on-year decrease of 55.62%; realized net profit attributable to shareholders of listed companies -635 million yuan, compared to -255 million yuan for the same period in 2015. Achieved EPS of -0.05 yuan, and -0.02 yuan in the same period in 2015.
Q3 Revenue continued to decline and gross margin increased. The company's revenue fell 55.62% in the first three quarters, mainly due to the divestment of container transportation and the decline in container transportation revenue after the restructuring. The company achieved revenue of 3,396 billion yuan in Q3, a year-on-year decrease of 62.21%; operating costs of 2,779 million yuan, a year-on-year decrease of 71.19%; achieved a gross profit margin of 18.16%, an increase of 25.52 pct over the previous year. The gross margin of the company also increased from 4.89% in the first three quarters. The company's overall gross margin for the first three quarters was 8.62%.
Transform a comprehensive financial platform and participate in central enterprise financial control platforms. After the restructuring, the company's main business was transferred from container liner operations to shipping-related asset leasing, creating a comprehensive financial service platform centered on leasing services such as ship leasing, container leasing, and non-shipping leasing, and featuring shipping finance. In May of this year, the company used 1.5 billion dollars in cash to participate in the fixed increase project of *ST Jinrui under the Minmetals Group, accounting for about 3.96% of the total share capital after the fixed increase. In September of this year, the company used 950 million dollars to participate in the CNPC Group's *ST Jichai Dingzeng project, accounting for about 0.97% of the total share capital after the fixed increase. Participating in financial control platforms under Minmetals Group and CNPC enables companies to learn from the valuable experience of financial business development of central enterprise groups and accelerate the development of their own financial business through inter-group cooperation. Continue to pay attention to the company's subsequent mergers and acquisitions of similar assets and business team building in the financial sector.
Constant growth helps the company transform. On October 11, 2016, the company announced that it plans to issue 3,279 million shares privately, with a total capital of no more than 12 billion yuan. The capital will be used to increase the capital of COSCO SHIPPING Leasing, increase the capital of Florence, repay maturing corporate bonds and supplementary working capital, invest in additional financial leasing assets and focus on medical, energy, education and innovation fields to promote the development of the non-aviation leasing business.
Profit forecasts and investment recommendations. The company will be in a construction period of transformation and loss reduction for some time to come. The 2016-2018 EPS is expected to be -0.01,0.12 and 0.20 yuan respectively, maintaining a “neutral” rating.
Risk warning: Container leasing downturn, management risks brought about by transformation