Events:
The high growth in reported performance mainly benefited from the reduction of financial costs and the recognition of non-recurrent income. The company achieved operating income of 918 million in the first half of 2016, an increase of 18.78% over the same period last year, and a net profit of 165 million, an increase of 345.43% over the same period last year. EPS is 0.31 yuan per share, the performance is in line with Shenwan's expectations.
Main points of investment:
A variety of businesses go hand in hand, and business income increases steadily. During the reporting period, the company completed electricity generation of 277 million kilowatt hours, an increase of 30.35 percent over the same period last year; completed electricity sales of 13.15 kilowatt hours, an increase of 8.09 percent; gas sales of 63.4 million cubic meters, an increase of 10.84 percent over the same period last year; and completed sales of 13.3317 million cubic meters, an increase of 4.57 percent over the same period last year. Benefiting from the simultaneous development of a variety of businesses, the company achieved an operating income of 918 million yuan, an increase of 18.78% over the same period last year.
The improvement of the financial structure reduces the financial expenses, and the end of the bankruptcy ruling of Ledian Tianwei brings non-recurrent income recognition. During the reporting period, the company's long-term borrowing dropped from 158 million to 100 million, a decrease of 36.71% compared with the same period last year. At the same time, it was confirmed that the bond interest income on Baomian Electric had led to a sharp drop in financial expenses. In addition, due to the end of Leshan Tianwei bankruptcy ruling, the company returned to non-operating income of 37.07 million yuan at one time. To sum up, the company achieved a net profit of 165 million yuan, a substantial increase of 345.43%.
The company is the only regional power grid company in Leshan area and will continue to benefit from power reform in the future. At present, the electricity reform is advancing steadily, and various localities have made great efforts to promote the reform of the electricity sales side. The company has laid out the power sales side, has clear first-mover advantages, and has the potential to expand the energy Internet.
In addition, the Leshan Municipal Government and Sichuan Electric Power Company signed a strategic cooperation agreement to use the company as a platform for integrating Leshan regional power resources and promoting the upgrading of Leshan power grid. It is agreed that the company will gradually acquire the equity of power supply enterprises and some power transmission and transformation facilities held by the former two companies in Leshan.
Sichuan accelerates the deepening of economic system reform, and the company is expected to benefit from the reform of state-owned enterprises in the future. The Sichuan provincial government issued the opinions on implementing the key work of the National Development and Reform Commission in deepening the Economic system Reform in 2015, which made it clear that the economic system reform will be promoted from eight aspects. It includes deepening enterprise reform, improving the modern market system, transforming government functions, improving the institutional mechanism for the overall development of urban and rural areas, speeding up the construction of an open economic system, deepening the reform of social undertakings, establishing and improving the ecological civilization system, and improving the institutional mechanism of innovation-driven development. We believe that the follow-up pace of capital of provincial state-owned enterprises is expected to accelerate, and the platform value of listed companies is prominent. as an integrated local energy platform, companies are expected to benefit from the reform of state-owned enterprises in the future.
Raise profit forecast and maintain buy rating: as the only regional power grid company in Leshan region, the company is expected to continue to benefit from power system reform and state-owned enterprise reform in the future. We raise the company's profit forecast and estimate that the net profit for 16-18 years will be 212 million yuan, 180 million yuan and 195 million yuan respectively, and the EPS will be 0.39 yuan, 0.33 yuan and 0.36 yuan respectively (the original profit forecast EPS for 16-18 years is 0.21 yuan, 0.24 yuan and 0.25 yuan respectively). The current stock price is 22 times, 26 times and 24 times respectively, maintaining the "buy" rating.