The performance is in line with expectations and maintain steady growth
The company announced that revenue in the first three quarters of 2016 reached 234 million yuan, an increase of 2.06 percent over the same period last year. Net profit belonging to shareholders of the parent company was 60 million yuan, up 7.52 percent from the same period last year, deducting 45 million yuan from non-net profit, an increase of 3.73 percent over the same period last year. The performance grew steadily and was in line with expectations.
The profitability increases, and the profit growth rate continues to accelerate in a single quarter.
The company's revenue maintained steady growth, with gross profit margin rising 3.23 percentage points to 37.63% in the first three quarters, and profitability improved. The expense rate increased by 2.70 percentage points to 13.93% during the first three quarters, mainly due to the increase in the financial expense rate. Among them, the sales expense rate increased by 0.05 percentage points to 4.73%, the management expense rate increased by 0.28 percentage points to 10.11%, and the financial expense rate increased by 2.36 percentage points to-0.92%. The company's financial expense rate is mainly due to the company's investment of 58.78 million yuan in the acquisition of 36% equity in Wuxi pterodactyl, a tire remanufacturing enterprise, during the reporting period. The growth rate of Q1, Q2 and Q3 net profit in 2016 was-15.50%, 16.22% and 22.37% respectively, and the growth rate continued to increase. We believe that the company's existing business will maintain steady growth.
There is plenty of room for tire remanufacturing, and business expansion is accelerated.
Wuxi pterosaur is mainly engaged in the remanufacturing and sales of aviation tires, automobile tires and industrial vehicle tires. it is the only enterprise in China that has been approved by the CAAC to engage in aviation tire business, and has a number of invention patents. The company currently holds a 36% stake in Wuxi pterodactyl and said it will continue to increase its stake and become Wuxi pterosaur's controlling shareholder within two years of the completion of the equity transfer. The scale of domestic civil aviation tire market is nearly 10 billion yuan, and the market scale of automobile tire remanufacturing is nearly 100 billion yuan, which has a large growth space for Wuxi pterosaur, and promises to achieve net profit of 5 million yuan, 30 million yuan and 50 million yuan from 2016 to 2018. On October 12, 2016, Jiangsu pterodactyl, a wholly owned subsidiary of Wuxi pterodactyl, signed a "zone entry agreement" with Wujin high-tech zone, in which Wujin high-tech zone sold 80 mu of industrial land to Jiangsu pterodactyl. Jiangsu pterodactyl invested 1 billion yuan in aircraft and automobile tire remanufacturing, indicating that tire remanufacturing business is accelerating, which is worth looking forward to.
Maintain the buy rating with a 6-month target price of 18.5 yuan
The company's main business is stable, tire remanufacturing accelerates expansion, and the expectation of transformation is strong. From 2016 to 2018, the EPS is expected to be 0.21,0.24 and 0.28 yuan, maintaining the buy rating with a target price of 18.50 yuan.
Risk hint: automobile production and sales have fallen sharply; the transformation is not as expected.