Introduction to this report:
The company released its 2016 three-quarter report. Revenue increased 15.68% and profit increased 29.47% in the first three quarters, slightly exceeding expectations.
The driving effect of the devaluation of the renminbi on revenue is beginning to be evident. The increase is about to be implemented, and major shareholders can be expected to help develop by leaps and bounds.
Key points of investment:
The company released its report for the third quarter of 2016. It achieved cumulative revenue of 698 million yuan in the first three quarters, 1.60% year on year, and achieved net profit of 6.58 million yuan over the previous year, corresponding to EPS of 0.26 yuan; the third quarter achieved revenue of 262 million yuan in a single quarter, an increase of 15.68% over the previous year, and Guimu's net profit was 27.04 million yuan, an increase of 29.47% over the previous year, slightly exceeding expectations. Benefiting from the devaluation of the RMB, the company's revenue began double-digit growth in a single quarter in the third quarter, while continuing to contribute exchange earnings.
We expect the company's full-year net profit to the mother to be close to the forecast upper limit of 30% year on year. The company's 2016-2018 EPS was raised to 0.34/0.37/0.40 yuan (up 0.04/0.05/0.06, not considering additional issues), maintaining the “increase in holdings” rating, with a target price of 21.08 yuan.
With the devaluation of the RMB, there are two layers of benefits: increased income+exchange earnings. The vast majority of the company's main business tool cabinet is exported. Benefiting from the devaluation of the RMB, export stimulus began to drive revenue growth. Quarterly revenue increased 15.68% in the third quarter, while continuing to contribute to exchange earnings (financial expenses for the third quarter - 1.14 million). There was an increase in raw steel costs in the second half of the year, but not by much. Gross margin remained stable. The depreciation of the RMB accelerated in the beginning of the fourth quarter. It is expected that the annual revenue growth rate will accelerate, and net profit of the mother will be close to the expected upper limit of 30%.
The fixed increase is expected to be implemented soon, and the majority shareholders are helping to develop by leaps and bounds. The company's announcement was approved by the Securities Regulatory Commission on August 17. It is expected that the issuance will be implemented soon. As the first capital market refinancing, the overall progress was rapid. On the one hand, it showed the company's strong execution, and on the other hand, it also showed that the company had begun to pay attention to the platforms of listed companies. At the same time, the majority shareholders' high share share (59.87%) +high-quality assets outside the body (Tongrun Auto Parts+Tongrun Drive Equipment) have laid a solid foundation for the company to achieve leapfrog development in the future.
Catalysts: implementation of non-public offerings; promotion of asset securitization or extension expectations.
Core risk: Asset securitization or extension expansion is blocked.