The company won the bid for 95.8 million yuan of porcelain insulators for the Zarut-Qingzhou UHV project
The company announced that it became the recommended winning candidate for package 4 in the China Grid Corporation's 2016 centralized bidding campaign for Zarut-Qingzhou ±800 kV UHVDC project insulators. It won the bid for 196,300 porcelain insulators, amounting to about 95.8 million yuan; accounting for 15.73% of the company's 2015 revenue, and the delivery period was December 30, 2016. A total of 4 packages of porcelain insulators were tendered for the Zarut-Qingzhou project. The company's largest bidder, accounting for about 34% of the winning bidders, further consolidating its market position. The company has already won bids for 4 lines in Ximeng-Taizhou, Shanghai-Miao-Shandong, Yuheng-Weifang, and Zalut-Qingzhou in 2016, with a cumulative order amount of 319 million yuan, more than double the UHV orders in 2015, providing a stable margin of safety for 16-17 performance.
Focus on electric porcelain products, and the vigorous construction of UHV boosts the company's performance
The company's market share in the UHV porcelain insulator field is over 40%. The gross margin of insulators reached 36.74% in the first half of the year, an increase of 10.32 pcts over the previous year. Composite insulators made a clear breakthrough this year. Revenue increased 332.56% year-on-year, and gross margin increased 7.20 pcts to 14.81%. It is expected that 4-5 more lines will be approved for construction in the second half of 2016, and it is expected that more than 30 UHV projects will be started within 5 years, and the corresponding insulator investment will exceed 10 billion yuan. As an industry leader, the company's order volume has continued to rise in recent years, adding a total of 371 million yuan in orders up to now in 2016. As the progress of power grid construction accelerates, the company's new order confirmation cycle will also be drastically shortened. Furthermore, the company's composite insulator products are expected to obtain railway CRCC certification within the year, which will open up a broad market outside the company's power grid.
The majority shareholders transfer shares, and the change of actual controller opens up space for epitaxial transformation
Liu Guixue, the former majority shareholder of the company, transferred 40 million shares held at a price of 28.00 yuan/share (including 20 million shares each for unlimited sale and 20 million shares with limited conditions of sale), accounting for 19.61% of the company's total share capital, with a total transaction consideration of 1.12 billion yuan. The transferee, Funing Yilong Magnetic Materials, took over the listed company. The actual controllers of Yilong Magnetics, Zhu Guancheng and Qiu Suzhen, own a number of assets related to rare earth reserves, separation, processing and magnetic material production. Expectations for future business restructuring of listed companies are strong. The transferee also stated that they will not rule out putting forward plans to carry out asset mergers, acquisitions and restructuring within 12 months. The company is expected to achieve a parallel model of multiple main businesses, which will open up a broad space for further development.
Professional managers+equity incentives to form effective management
The company offered its first equity incentive in 2015, and granted 4 million restricted shares to management and core technical personnel. The unlocking conditions were that net profit for 15, 16, and 17 increased 60%, 70%, and 80% compared to 2014. According to the third-quarter performance forecast, reaching the unlocking conditions this year was a definite event. It is expected that the new actual controller is more likely to complete the company's business and carry out new goals with equity incentives for new management after personnel adjustments, and the company's performance will reach a new level.
Profit forecasting
It is predicted that the company's EPS in 16-18 will be 0.47 yuan, 0.62 yuan, and 0.79 yuan respectively, and the corresponding PE will be 61 times, 47 times, and 37 times, respectively, maintaining the company's “increase in holdings” rating.
Risk warning: UHV construction progress falls short of expectations, and extension progress falls short of expectations.