Summary of the report:
Hydroelectric power is still the main industry, and Laishui rich income is high: in the first half of 2016, the company confirmed operating income of 164.7112 million yuan and realized operating profit of 123.147 million yuan. The net profit belonging to the parent company was 96.691 million yuan, up 21.48%, 42.29% and 44.59% respectively from the same period last year. The growth in revenue and profits mainly comes from the hydropower business. In the same period, hydroelectric power generated 163.1201 million yuan in revenue, accounting for 99.03% of the total operating income, up 20.70% from the same period last year. This is mainly due to the higher rainfall in Hunan since the beginning of the flood season this year and the high-load operation of hydropower. It is expected that the water situation will return to normal in the next two years, and the income from hydropower business will return to the level of previous years.
Major breakthroughs in rehabilitation medicine, accelerated layout inside and outside the province: in June this year, the chain layout of the rehabilitation medical industry under the subsidiary Kangnian Company made great progress. The newly established Hengyang Boai Children Rehabilitation Hospital and Changde Boai Rehabilitation Hospital have successively obtained a practice license and business certificate, and officially opened for business. In July, Kangnian Company and Hubei Qiaoya Company planned to jointly set up Wuhan Qiaoya Boai Rehabilitation Hospital with a registered capital of 60 million yuan, of which the company contributed 39 million yuan, accounting for 65%. This is an attempt at the layout of the company's rehabilitation medical industry outside the province, which is of great significance. It is expected that the company's rehabilitation sector business will develop rapidly in the future, but its revenue share is still small in the near future.
New progress in healthy pension and orderly progress of Chunhua project: in May this year, the company issued a notice announcing that Chunhua, the company's healthy pension industry platform, formally signed the "Changsha County Investment and Investment Project contract" with the county government of Changsha, specifically stipulating the amount of investment, land use and preferential conditions of the project. According to the plan, Chunhua Health Industrial Park will be built into a large-scale health preservation and old-age tourism complex, with a total investment of about 4 billion yuan and a total scale of 1188 mu of construction land, which will be carried out in three phases, including 385mu of construction land in the first phase, with an investment of not less than 1 billion yuan.
Valuation and financial forecast: considering the particularity of the water situation this year, the company's hydroelectric power generation is expected to decline in the next two years. At the same time, rehabilitation medical treatment will be carried out in an orderly manner, but hydropower will still be the main source of income. The company's operating income in the next three years is expected to be 3.34,2.77 and 280 million yuan respectively, and the net profit belonging to the parent company will reach 1.64,1.45 and 145 million yuan respectively. The EPS is 0.35,0.31 and 0.31 yuan respectively. Give an overweight rating.
Risk hints: climate risk, rehabilitation medical promotion risk