In the first half of 2016, the company achieved operating income of 1,119 million yuan, an increase of 0.64% over the previous year; operating profit of 61.24 million yuan, an increase of 55.77% over the previous year; net profit attributable to owners of the parent company was 39.07 million yuan, an increase of 81.84% over the previous year, equivalent to EPS of 0.10 yuan.
In the first half of 2016, revenue from the main business remained stable. The company's main business is the production and operation of products such as clean and environmental engineering and equipment, high-voltage porcelain insulators for power transmission and transformation, needle roller bearings, various optical, mechanical and computer integrated surveying and mapping instruments, and various abrasives and abrasives. In the first half of 2016, the company's main business revenue was 1,098 million yuan, an increase of 0.64% over the previous year. Among them, clean and environmental protection equipment and engineering achieved sales revenue of 470 million yuan, a year-on-year decrease of 0.59%; the transmission and transformation high-voltage insulator business achieved sales revenue of 298 million yuan, a year-on-year decrease of 2.63%.
The comprehensive gross margin increased dramatically, and the cost ratio increased during the period. The company strengthened reforms in accordance with the established “improving quality and efficiency, stable development”. In the first half of 2016, the company's comprehensive gross margin increased 2.55 percentage points year-on-year to 26.82%. Among them, the gross margin of the clean environmental equipment and engineering and power transmission and transformation high voltage insulator business increased by 3.29 percentage points and 4.21 percentage points respectively. In the first half of 2016, the company's expenses ratio increased by 0.38 percentage points over the same period last year. Among them, the sales expense ratio and management expense ratio increased by 0.64 percentage points and 0.77 percentage points respectively.
A fixed increase in the acquisition of photovoltaic assets. In July 2016, the company announced a plan for a non-public stock offering. The company plans to issue 62.34 million shares to Suzhou City Investment and Suzhou Cultural Tourism, raising 496 million yuan after deducting issuance expenses to acquire 100% of the shares of Hanshou Haohui Solar Power Co., Ltd. and increase its capital, as well as to acquire 100% of the shares and increase the capital of Artesfuning Photovoltaic Power Generation Co., Ltd. The total installed capacity of the second phase of Hanshou Haohui's photovoltaic power plant project was 40 MW. The project achieved operating income of 9.88 million yuan and net profit of 4.49 million yuan in the first half of 2016; the total installed capacity of the fourth phase of Artes Funing's photovoltaic power plant project was 25 MW. The project achieved revenue of 16.36 million yuan, net profit of 10.05 million yuan in the first half of 2016, and the static price-earnings ratio of the acquisition was 17 times. If the acquisition is successfully implemented, it will optimize the company's business structure, expand the business scale, and extend the industrial chain to a certain extent, thereby improving the company's core competitiveness, profit level and wind resistance.
Profit forecast and investment rating: We expect the company's net profit attributable to parent company owners in 2016-2018 to be 33.9 million yuan, 64.82 million yuan and 79.02 million yuan respectively, equivalent to the EPS of 0.08 yuan, 0.16 yuan and 0.20 yuan respectively. Corresponding to the calculation of the closing price of 10.25 yuan on the previous trading day, the corresponding price-earnings ratio was 121 times, 65 times and 52 times respectively. Future performance is expected to continue to improve. For the first time, we have given the company a “prudent recommendation” investment rating.
Risk warning: The fixed increase has not been approved.
