Main points of the report
Event description
The company released its three quarterly results for 2016.
Event comment
The company's performance has fallen sharply and the scale of its business has narrowed. In the first three quarters of 2016, the company achieved operating income of 270 million yuan, down 37.78 percent from the same period last year. Net profit belonging to shareholders of listed companies was 29 million yuan, down 68.24 percent from the same period last year, and basic earnings per share was 0.06 yuan per share. The decline in profits in the first three quarters was mainly caused by the slowdown in economic growth and the decline in the scale of investment in the petrochemical and coal chemical industries. The company forecasts that the net profit attributed to the parent company in 2016 is 25 million yuan to 50 million yuan, down 80% to 60% compared with the same period last year.
The net interest rate rose, and the cost increased during the period. The company's gross sales margin in the first three quarters of 2016 was 34.71%, down 0.90 pct from a year earlier, and net profit was 14.11%, down 7.87pct from a year earlier. The expense rate during the period was 15.17%, an increase of 5.38pct over the same period last year, and the decline in operating income was the main reason for the increase in expense rate during the period. The loss of asset impairment was 12 million yuan, an increase of 41.69% over the same period last year, mainly due to the increase in the company's provision for bad debts based on accounts receivable. The operating net cash flow was 78 million yuan, an increase of 9 million yuan over the same period last year, mainly due to the increase in bank margin and the decrease in the total amount of purchase payments for general contracted projects.
Last year, Q4, Q1, Q2, and Q3 achieved operating income of 1.93 million yuan respectively, up-52.37%, 12.64%, 57.90%, 28.16%, respectively, compared with the same period last year. The net profit attributable to shareholders of listed companies was 0.34, 0.18, 0.09 million yuan, respectively, an increase of-37.27 percent, 28.40 percent, 93.72 percent, 68.48%, respectively. Due to the seasonality of settlement, the company's fourth-quarter revenue and profits contribute more to the annual performance.
The industry is in the doldrums, reducing costs and increasing efficiency and positive transformation. Subject to the continuous decline in the prosperity of the industry, the company's main business has been hit, but the company based on reality, cancel the wholly-owned subsidiary Qingdao Hetong, in order to achieve the purpose of reducing cost and increasing efficiency. At the same time, the company actively sought transformation, acquired 7.14% equity in Puyi Environmental Protection with 2 million yuan at the end of 2015, participated in the ship exhaust gas treatment business, and shared the magnificent demeanor of the environmental protection industry; in 2014, it took a stake of 3.9 million yuan in Shanghai Zhishang (equity ratio 39%). In 2015, the company invested 50 million to set up PetroChina 3D, so as to improve the company's industrial chain and create a national B2B e-commerce platform for chemical and petrochemical raw materials.
Enter into photothermal power generation and open up new profit growth points. In the first quarter of 2016, the company won the bid "Zhongguang Delingha photothermal power generation project EPC" with a contract price of 256 million yuan. As the first large-scale commercial photothermal power plant in China, the project is of benchmarking significance. In the future, the company will be based on its own technological advantages, rely on this project to further optimize the trough heat storage technology, at the same time do a good job in tackling key technical problems and improving the corresponding technical reserves of the "heat storage system" of tower photothermal power stations, and strive to become a domestic photothermal power generation "heat storage" technology leader and open up new profit growth points.
Investment advice: forecast company 2016-2018 EPS 0.10 pound 0.11 0.13 yuan, corresponding to 2016-2018 PE is 93-86-69 times, given a buy rating.
Risk hints: macroeconomic fluctuation risk, fixed asset investment risk, asset restructuring risk, etc.