Main points of investment
2016H1 performance has declined. Junzhi Group (1300.HK) announced its mid-term results on August 24: revenue was 1.336 billion yuan, down 10.4% from the same period last year; gross profit was 285 million yuan, down 15.5%; gross profit fell to 21.4% from 22.6% in the same period last year; net profit was 76.37 million yuan, down 45.6% from the same period last year, with an interim dividend of HK1.2 cents per share. The decline in the company's operating performance in the first half of the year was mainly affected by the decline in copper prices and changes in product sales structure as well as increased provisions.
Sales of coaxial cable increased, but unit prices decreased. In the first half of the year, coaxial cable sales increased by 10.2% to 78700 kilometers, and the price per kilometer dropped to 8440 yuan per kilometer from 1.118 million yuan per kilometer in the same period last year. Composite gross profit margin fell 1.2 percentage points to 21.4%
The sales volume of optical cable products increased, and the production capacity increased to 15 million core kilometers. In the first half of 2016, the company's optical cable sales increased by 17.3% to 4.4 million core kilometers compared with the same period last year, accounting for 29.2% of the turnover, and the annual production capacity has increased to 15 million core kilometers. Optical cable business has become a new performance growth point of the company.
Increasing the provision for receivables is a drag on net profit. In the first half of 2016, the company's accounts receivable increased the provision for doubtful debts by 81.66 million yuan, and the exchange loss was 7 million yuan, plus the change in the fair value of warrants decreased by 7.43 million yuan. After deducting these non-recurring gains and losses, the company's shareholders' net profit is about 157 million yuan, and the adjusted net profit margin is about 11.8%, which is basically the same as last year's 11.3%.
Our point of view: in the first half of the year, the management and secondary department personnel of the three major telecom operators in China adjusted more frequently, which affected the progress of investment in communication network construction to a certain extent. In recent years, the business of RF coaxial cable and flame retardant flexible cable has been trapped by the continuous decline of copper prices, objectively forming a state of volume increase and income decline. at present, copper prices basically maintain a low and stable state. The company seizes the good opportunity of market development to expand optical cable production capacity, optical cable business has become a new profit growth point, investors are advised to actively pay attention.
Risk hint: the investment of the three major communication operators is lower than expected; accounts receivable are overdue; exchange rate depreciation losses.
