Brief comment on performance
Jiangnan Chemical released its 2016 semi-annual report that the company's operating income in the first half of the year was 617 million yuan, down 2.61% from the same period last year; the non-net profit attributed to listed shareholders was 41.98 million yuan, down 18.97% from the same period last year; and the corresponding EPS was 0.0531 yuan, down 16.38% from the same period last year. At the same time, the company expects the year-on-year change in net profit belonging to listed shareholders from January to September to be 30%, 60%, corresponding to 6221.02-76.5664 million yuan.
Business analysis
Blasting equipment business remains in the doldrums and drags down performance: under the background of the new normal economy, the civil blasting industry generally maintains a low economic situation, and the output and prices of the blasting equipment industry decline to a certain extent, thus dragging down the company's performance. The company's revenue from civilian explosives and blasting equipment decreased by 13.86% and 12.25% respectively compared with the same period last year, and its performance as a leading company in the industry is still better than the average in the industry.
Blasting engineering business maintained growth: the company's blasting engineering business revenue increased by 35.35%, and the gross profit margin remained stable. Benefiting from the company's active development in this business area, the company's revenue scale has increased steadily, and due to the moat formed by the company's high qualification in blasting engineering, the company's overall profit level has remained stable. We believe that the company's blasting business will maintain steady growth in the future.
New areas and new businesses are still actively expanding: in April, the company and Rushan Capital jointly launched the establishment of a new industry fund, Rushan Huiying, which is actively expanding in the fields of smart cars, self-driving, big data, information security, virtual reality (VR) and so on. The company bought a stake in Tianjin Fengshi Interactive in May and cut into the field of human-computer interaction, an attempt to extend a new field after investing in Beijing Turing Robot in 2015. We believe that the company will continue to rationalize its layout along this path in the future.
Non-public offering related matters proceed in an orderly manner: matters related to the company's non-public offering were successfully approved by the regulatory authorities in June 2016, which will further add weight to the company's future development. The fund-raising investment will provide strong support for the company's main business upgrading, intelligent production information management, mine repair, overall mine contracting and other new business.
Investment suggestion
Taking into account factors such as the continued growth of the company's blasting business this year and in the future, as well as the smooth promotion of the company's main business, we raise our profit forecast to 0.105 yuan, 0.122 yuan and 0.146 yuan respectively in 2016-2018, maintaining the overweight rating.
Risk.
The macroeconomic downturn continues to fall short of expectations in the promotion of new business.
