Event

Ruitai Technology released its three-quarter report that the company's operating income from January to September 2016 was 1.306 billion yuan, down 7.64 percent from the same period last year, while the net profit belonging to shareholders of listed companies was 27.4026 million yuan, up 286.38 percent from the same period last year. Basic earnings per share is 0.12 yuan.

Brief comment

1. The operation has improved significantly and the momentum of recovery is obvious. The company's operating income from January to September 2016 was 1.306 billion yuan, down 7.64 percent from the same period last year, significantly narrowing from the decline in the third quarter of 2016; 27.4026 million yuan, up 286.38 percent from the same period last year, and the fourth quarter performance is expected to further improve. In the face of the downward trend of macroeconomic growth in 2016, the refractory industry has experienced an overall decline in output, sales revenue, profits, export volume, trade volume and average export price, while a passive situation of rising receivables, showing a "six declines and one liter" operation. Under a multi-pronged approach in an unfavorable environment, the company's operation remained stable, with only a slight decline in operating income in the first three quarters, and a significant increase in net profit. In the future, as the economy stabilizes and the industry integrates, enterprises are expected to achieve further development in the fourth quarter and beyond.

two。 Strict control of costs has achieved remarkable results. During the reporting period, the company's expense rate decreased significantly, from 24.5% in the fourth quarter of 2015 to 22.8% in the reporting period, mainly due to the company's strengthening the centralized management of funds and improving the efficiency of the use of funds. In terms of profitability, the company's gross profit margin was 23.8%, which remained stable. Net interest rates bottomed out after falling to a low of-3.0% in the fourth quarter of 2015, rising 5.5% to 2.5% in the reporting period, while the company's ROE rebounded strongly from-19.5% in the fourth quarter of 2015 to 9.5% in the reporting period, a significant rebound of 29%, and the company's profitability has been greatly improved.

3. With the diversified development of downstream business, glass business takes the lead. The industry distribution of the downstream business of the company is more balanced, unlike 70-90% of the income of the major enterprises in the industry comes from the iron and steel industry, the proportion of the company's steel business income is only about 1/3, and the proportion of cement business income is the same as that of iron and steel. Glass business also accounts for about 20% of revenue. In 2015, the entire steel, cement and glass industries were in trouble, but in 2016, the glass industry took the lead in reviving. The company improved its operating performance by developing the daily glass market and the international market. The operating income of refractories for glass kilns increased by 18.14% over the same period last year, and profits increased significantly over the same period last year. Furthermore, as the demand of the cement industry and the steel industry stabilizes in the second half of the year, the company's business is expected to achieve a rebound in the cement and steel industries while continuing the revenue boost in the glass industry in the fourth quarter.

4. Industry and research is outstanding, full of stamina. The company is a national key high-tech enterprise, relying on the strong scientific research and development background of the controlling shareholder, China General Institute of Building Materials Science and Research, it has a large number of professional and technical personnel and skilled highly skilled workers as well as excellent instruments and equipment and laboratories with good conditions. Successfully developed environmentally friendly alkaline refractories, special ramming materials for waste heat power generation, low thermal conductivity composite mullite bricks, high corrosion resistant refractories and other refractory products and production technologies that serve energy saving and emission reduction in high temperature industry and green environmental protection, and realize industrialization within the enterprise, is the leading enterprise in the industrialization of scientific and technological achievements in the industry. In 2015, 59 patents were applied for and 47 patents were granted. The company will continue to invest in R & D in 2016 and can be expected in the future. The outstanding advantage of industry and research is the company's core competitiveness, which makes the company's products invincible in the ever-changing market environment with higher quality.

5. Profit forecast and investment rating: we expect the company's operating income in 2016 and 2017 to be 1.95 billion yuan and 2.1 billion yuan, an increase of 5.66% and 7.69% over the same period last year; the net profit attributed to the parent company is 36.21 million yuan and 51.28 million yuan; and EPS is 0.15 yuan and 0.24 yuan. Maintain the "overweight" rating.