Events:

From January to September 2016, the company achieved revenue of 1.136 billion yuan, down 16.39% from the same period last year; net profit belonging to shareholders of listed companies was 88.8183 million yuan, down 39.27% from the same period last year; non-net profit belonging to shareholders of listed companies was 82.5863 million yuan, down 17.38% from the same period last year; basic earnings per share is 0.10 yuan.

Main points of investment:

Q3's single-quarter profit changed from negative to positive, and the financial expense rate dropped sharply compared with the same period last year, driven by the company's net investment income rose from-79 million yuan in the same period last year to 56 million yuan this year. Q3 achieved a net profit of 7.94 million yuan in the parent stock in the single quarter, far better than the loss of 130 million yuan in the same period last year. It is expected that the increase in investment income is mainly due to the improvement of Dongfeng Yueda Kia's profit.

In addition, benefiting from the decline in financing costs caused by the repayment of bank loans, the company's Q3 single-quarter financial expense rate continued the previous trend, falling from 10.34% to 7.46%, reducing expenditure by nearly 20 million yuan.

Sales have improved significantly, but Dongfeng Yueda Kia's profit repair is not as good as expected. Dongfeng Yueda Kia's sales this year have improved compared with last year, and monthly sales growth has been maintained at more than 20% since June. From January to September, Dongfeng Yueda Kia sold a total of 423600 cars, an increase of 5.2 per cent over the same period last year, of which the profitable SUV sold more than 140000 vehicles, a cumulative growth rate of more than 60 per cent. Although the sales figures are eye-catching, from the profit side, the overall performance is lower than we had expected. Although Q3 improved sharply in a single quarter compared with the same period last year, from January to September, the company achieved a net investment income of 270 million, a decrease of 20% compared with the same period last year, and a decrease of 70% compared with the level of 900 million yuan in 11-13 years. The sharp decline in investment income shows that Dongfeng Yueda Kia's profitability has not improved significantly. It is expected to continue to boost profitability through measures such as adjusting the sales structure and reducing costs, and the follow-up effect remains to be seen.

Maintain the recommended rating.

Considering that the profit repair of Dongfeng Yueda Kia is not as expected, we cut the company's EPS for 16-18 years to 0.271, 0.35 and 0.43 yuan, with a price-to-earnings ratio of 33 times, 25 times and 20 times respectively, maintaining the "recommendation".

Rating.

Risk hint: Dongfeng Yueda Kia's profits fell short of expectations; other business profits deteriorated significantly.