Brief comment on performance
In the first half of 2016, the company achieved operating income of 1.359 billion yuan, an increase of 30.82% over the same period last year; net profit belonging to shareholders of listed companies was 101 million yuan, up 0.82% from the same period last year; and net profit after deducting 95.926 million yuan, an increase of 5.77% over the same period last year.
Business analysis
Business performance as a whole maintained steady growth. In the first half of 2016, the company achieved operating income of 1.359 billion yuan, an increase of 30.82% over the same period last year, mainly from the logistics service business of Shanghai Shensi, the sewing equipment of gems and the combined contribution of Stoll of Germany, of which the revenue of sewing equipment was 817 million yuan, up 14.50% from the same period last year, and the revenue from logistics services was 331 million yuan, an increase of 223.15% over the same period last year. The company's medium-term net profit was 101 million yuan, an increase of 0.82% over the same period last year. The reason for the small increase in net profit is, first, the increase in the scope of consolidated statements in the current period, and the increase in management expenses by 30.64 million yuan over the same period last year; second, the gross profit margin of logistics services (9.6%) is lower than that of sewing equipment (42%), and the comprehensive gross profit margin of products has decreased.
Promote internal and external integration, strengthen the main sewing industry. Internally, during the reporting period, the company began to absorb and merge Shanggong butterflies, optimize the management structure and enhance the profitability of the parent company; the medium and heavy material machine business has been relocated to Zhangjiagang as the production base. completed the layout of the three major production bases in China (Nanxiang, Zhangjiagang and Taizhou). Externally, the company has successively acquired three important sewing equipment companies in Europe, Dukerpur Aihua, Baifu and KSL, and integrated on the European platform of Shanggong; in January this year, the company held a 26% stake in Germany's Stoll through an increase of 28.5 million euros in Europe, and has now completed the delivery work, so that the company's sewing equipment has been extended to computerized flat knitting machines.
State-owned equity transfer, looking forward to the follow-up reform. Pudong SASAC and Puke Feiren have signed an agreement to transfer 60 million shares of the company at a price of 11.88 yuan per share and a transfer price of about 713 million yuan. if the transfer is completed, Pudong Feiren will become the largest shareholder of the company, and Pudong SASAC will become the second largest shareholder. The transferee, Puke Flying, is a wholly-owned subsidiary of Pudong Science and Technology Investment, with a registered capital of 3 billion, mainly investing in high-tech industries, and has rich investment experience at home and abroad. This share transfer is an important practice in implementing the reform of state-owned enterprises, which will help to promote the company to improve its governance structure and follow-up overseas layout.
Profit forecast
We forecast that the company's operating income from 2016 to 2018 will be RMB 26.15, 28.40, RMB 3.076 billion, an increase of 13%, 8.6%, 8.3%, respectively, and a year-on-year increase of 1.81%, 2.06, and 231 million yuan, respectively, an increase of 15.2%, 13.4%, 12.5%, and 0.33 PE, respectively, and the corresponding EPS will be times that of 48-42-38.
Investment suggestion
We believe that the company's business integration in Europe has achieved good results, mastering the automation technology of high-end sewing equipment, while actively increasing the domestic market for intelligent standard products, and has a leading advantage in domestic demand adjustment. We maintain the company's "buy" rating with a target price of 20 yuan for the next 6-12 months.
Risk hint
The risk of further business integration in Europe, the risk of further downward demand in the sewing equipment market, and the risk of business expansion in new areas such as logistics services.