Key points of investment

Incident: The company announced its 2016 three-quarter report. During the reporting period, it achieved operating income of 12.07 billion yuan, a year-on-year decrease of 55.6%; net profit loss of 630 million yuan, equivalent to EPS of -0.05 yuan, a loss of 260 million yuan for the same period last year; net profit loss after deducting 1.34 billion yuan, a loss of 350 million yuan for the same period last year. Of these, net profit for Q3 was 210 million yuan, and net profit after deducting net profit was a loss of 70 million yuan.

The restructuring was basically completed in the first half of the year, with a loss of 70 million yuan after deducting Q3. In the first half of the year, the company basically completed asset restructuring and transformed into a comprehensive financial service platform focusing on diversified leasing businesses such as ship leasing, container leasing, and non-aviation financial leasing. The company's performance for the first half of the year included the period expenses arising from the January-February liner operation and restructuring. Q3 was the performance after the restructuring, which achieved net profit of 210 million yuan, but included a subsidy of 270 million yuan, and a small loss of 70 million yuan after deducting fees. We think it's because the company has just transformed into a financial platform and has entered a new field, and it will take some time for the business to get on the right track.

It will increase by 12 billion yuan to develop financial leasing and container leasing business. In October, the company announced a fixed increase plan. The plan is to increase no more than 3.68 billion shares at a price of not less than 3.66 yuan/share, and raise no more than 12 billion yuan in capital, of which the majority shareholders promised to subscribe for 50-7 billion yuan. The net amount raised will be used to increase COSCO SHIPPING Leasing, increase capital in Florence, pay off maturing debts, and supplement liquidity. Of this amount, 6 billion dollars will be used to increase the capital of COSCO Shipping Leasing to further expand the financial leasing business layout, add investment in financial leasing assets and focus on developing medical, energy, education and innovation fields, and 2.4 billion dollars in capital increase for Florence to purchase containers and expand the container leasing business.

Investment advice. Judging from the Q3 results, the company has not yet been able to make a profit. The company has transitioned from a container liner company to a financial company mainly in the leasing business, and has entered a new field. It will take some time for the business to get on the right track. Future development needs to continue to be followed up and observed, and profit predictions and ratings will not be made for the time being.

Risk warning. Financial business development is slow, and transformation results are lower than expected