Introduction to this report:
The performance of traditional business increased slightly in the first half of the year, and the comprehensive utilization of water resources business is expected to provide stable cash flow and provide space for the deployment of the sports industry.
Key points of investment:
[First half results] There was a slight increase, in line with expectations. The company announced its 2016 semi-annual report with operating income of 343,615,300 yuan, an increase of 7.04% over the previous year; net profit attributable to shareholders of listed companies was 7.336,800 yuan, an increase of 5.37% over the previous year, in line with expectations. Traditional businesses increase marginal profits by extending the industrial chain downstream, increasing technological content, and entering the field of water environment management, etc., which are expected to provide stable cash flow and provide space for the layout of the sports industry. Maintain the company's 2016-2018 EPS forecast of 0.01/0.03/0.05 yuan, maintain the target price of 20.3 yuan, and the “increase in holdings” rating.
Comprehensive utilization of water resources is expected to provide a stable cash flow. The company has the largest water area in the country. It uses the natural extension of the water area industry chain to increase marginal profits by extending the industrial chain downstream, increasing the content of technology, and entering the field of water environment management, etc., which is expected to provide the company with a stable cash flow.
The “Boxing Star Era” tournament brand and entertainment attributes have made another breakthrough. The martial arts event “Boxing Star Era” sponsored by the company has signed a cooperation agreement with CCTV. September 23, “The Age of Boxing Stars”
The fifth game will be played in Beijing, and it will also be the first appearance since landing on CCTV. The game is scheduled to be broadcast on 5 CCTV stations during prime time on Friday night from 19:30-21:30. We believe that cooperation with CCTV will greatly enhance the brand value of the tournament. Furthermore, “Boxing Star Era” has a pan-entertainment layout based on its own high-quality IP, and plans for major movies and the opening of fight gyms have steadily progressed, effectively expanding the brand's reach from simple hardcore fighting fans to the general public. Since the company has appointed Yang Jianping, the founder of “Boxing Star Era”, as vice president to work in the sports industry, we determine that the level of cooperation between the company and “Boxing Star Era” may go deeper.
Catalysts: Non-public offering completed; transformation projects implemented.
Core risks: Traditional businesses decline further; transformation progress falls short of expectations.