Main points of the report

Event description

Tianshun shares released the 2016 mid-term report. In the first half of the year, the company achieved operating income of 238 million yuan, down 0.97% from the same period last year, gross profit fell 1.54 percentage points year-on-year to 14.38%, net profit belonging to the parent company increased by 13.05% to 14.6431 million yuan, EPS was 0.25 yuan, and 0.23 yuan in the same period last year.

Event comment

Operating income fell slightly compared with the same period last year, while attributable net profit increased year-on-year. In the first half of 2016, the company's operating revenue decreased by 0.97% compared with the same period last year, mainly due to the impact of the overall downward pressure on the domestic economy and the slowdown in upstream and downstream customer demand, the growth rate of industrial logistics in Xinjiang continued to slow, and the company's main business income declined slightly. The company's attributable net profit increased by 13.05% over the same period last year, mainly due to government subsidies in the first half of the year, resulting in a sharp increase in non-operating income of 126.32% to 4.6327 million yuan.

The cost dropped slightly during the period. Expenses during the company period fell slightly by 2.21% in the first half of the year. Among them, as the company's loans decreased compared with the same period last year and the loan interest rate declined, the company's financial expenses decreased by 29.05% to 5.4102 million yuan compared with the same period last year; due to the company's issuance and listing, publicity expenses, travel expenses, hospitality expenses and other related expenses increased year-on-year, and the company's management expenses increased by 31.13% year-on-year to 8.8995 million yuan.

Increase the construction of logistics park and enter the foreign market. At present, the company's income mainly comes from Xinjiang, of which, in the first half of 2016, Xinjiang revenue accounted for 98% of the total income. The investment projects raised by the company include the construction of Xinjiang Tianshun Hami Logistics Park and the construction of logistics management information system, in which the Hami Logistics Park project plans to use the raised funds to invest 90.08 million yuan, and the logistics management information system construction project to use the raised funds to invest 13.96 million yuan. The Hami Logistics Park project is expected to take 2 years to complete. After reaching production, the company will increase its storage capacity by 65100 cubic meters, with an average annual sales income of 86.572 million yuan and a net profit of 30.74 million yuan. After the completion and implementation of the Hami Logistics Park project, it will help the company to enter the foreign market and improve the company's business income structure.

Maintain the "overweight" rating. Considering that the company is the leading enterprise of comprehensive third-party logistics in Xinjiang, the business model of the combination of light and heavy assets is becoming more and more mature and can be replicated; at the same time, the company's layout of an important economic hub in Xinjiang has obvious geographical advantages. Will fully benefit from Belt and Road Initiative's policy.

It is estimated that the company's EPS from 2016 to 2018 will be 0.49 yuan, 0.53 yuan and 0.62 yuan respectively, and we maintain the "overweight" rating.

Risk hint: the demand for commodities remains sluggish, the risk of accounts receivable and the risk of default by outsourced parties